An employer is legally required to provide a Summary Plan Description (SPD) of your 401(k), including information about eligibility, vesting and benefit payouts. The plan fiduciary may be required, however, to distribute prospectuses and financial statements on the investments. Additionally, information on your 401(k) plan’s investment options may come from the investment manager directly.
Remember that a prospectus is required for all mutual funds by law. Mutual funds are sold by prospectus, which is available from your registered representative. Please carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information about any mutual fund investment please obtain a prospectus and read it carefully before you invest. Investment return and principal value will fluctuate with changes in market conditions such that shares may be worth more or less than original cost when redeemed. Diversification cannot eliminate the risk of investment losses.
To make sound judgments regarding your 401(k) plan, you’ll want to know the following:
- What is the maximum amount/percentage you can contribute?
- What is the percentage your employer will match? Is there a minimum amount you must contribute before the 401(k) matching contribution kicks in? Is there a maximum?
- How many years of company service are required before you are fully vested in your employer’s contributions to your 401(k)?
- How often can you transfer money between the investment options in your 401(k) plan?
- When are earnings on contributions credited to your account—daily, monthly, quarterly, or annually? Earnings on contributions that are posted more frequently generally compound faster.
- How often are account balance statements provided?
- How can you access your account? Can you get updates or make transfers via computer, phone or written correspondence?
- What is the history of the investments you have chosen? Review the investment information provided with your 401(k) plan. Educate yourself by spending some time online and at the local library, and read publications such as The Wall Street Journal, Barron’s, Business Week, Money, Forbes, Fortune and the monthly Standard & Poor’s Stock Report.
- Have you sought financial advice? You may want to consult a financial advisor or tax professional about your family’s future needs.
- Have you allocated your assets? Distributing your money across different types of investments, while not guaranteed, is a way to help reduce risks and enhance returns.
