7 Ways to Check Up on Your 401(k)

You need to periodically review your 401(k) investment options.


Once you start work at a new company you will probably be invited to join their 401(k) plan. You will need to spend a few hours selecting the proper investment choices and deciding on the percentage of your salary to contribute. However, this is only step one.

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For many people, starting to contribute to a 401(k) is difficult. But the more challenging part is actually maintaining your retirement accounts. Sure, your contributions and investments are automated. But your financial situation changes over time. Here are seven details you should check up on to make sure your 401(k) is on the right track.

1. Does the beneficiary need to change? The default beneficiary for your 401(k) is your spouse. But this is not always the ideal financial choice. Every life change necessitates a closer look at the beneficiaries for all your assets, including your 401(k).

2. Do you need to adjust your asset allocation? You can set it up so that your investments will automatically rebalance to an asset allocation you select. However, you should still periodically review the allocation you selected. Perhaps you were 25 when you set this up. As you age, you should slowly move more money into safer assets. Look into this every few years to see if everything is still where it should be. Remember to factor your job into your asset allocation too.

[See The Importance of Negotiating Your Salary.]

3. Have your investment choices changed? 401(k) plans can change without your involvement as companies add, delete, and change funds for numerous reasons. Your investments will typically be automatically shifted into a similar fund, but that doesn't mean that the new choice will fit your situation. Make sure you know what you are investing in.

4. Do you know your vesting schedule? Most people are still feeling bad about the economy. But eventually things will pick up and you may once again be thinking about changing jobs. Make sure you factor in your 401(k)'s vesting schedule when trading employers. Let's say you are a month away from qualifying for all the company contributions to your 401(k). It might make sense to wait and ask your next employer to give you a bit more time.

5. Have you taken advantage of free professional help recently? Almost all 401(k) plan administrators know who can answer at least general investment questions. Many employers offer seminars and one-on-one sit down meetings for employees. Take advantage of employer-sponsored investment advice whenever you can. These meetings are generally free, and a second opinion always helps.

6. Have the fees changed? If your employer changes the 401(k) service provider or investment options, it’s likely that the 401(k) fees you are changed will also change. Remember that the less you are paying someone else, the more you are keeping for yourself.

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7. Do you need to change your contribution? Most people need to increase their 401(k) contributions. While you may not be able to save more when you are first starting out, salary increases might allow you to do so now. If your company eliminated its 401(k) match or offers poor investment choices, consider putting some money into a Roth IRA account instead.

It’s not a good idea to just set a 401(k) up and forget it. The good news is that maintaining your accounts doesn't take a whole lot of time, and these simple checkups can make a huge difference.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.