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How to Read Your 401(k) Statement in 5 Minutes
Your 401(k) statement arrives quarterly, and most people check exactly one line: the balance. That skips the parts that determine what the balance becomes. Here is a five-minute routine that covers the rest.Minute One: The Four Numbers
Find these on page one. Balance — your running total. Your contributions — what you put in year to date. Employer contributions — match and profit sharing. Investment earnings — the market's share. Compare your contributions plus employer money against the balance change; the gap between them is what your investments did this quarter. If earnings are negative while the market rose, the problem is inside the statement, not the market.
Minute Two: The Match Check
Your employer match is a guaranteed, instant return — often 50% or 100% on the first few percent of salary. Multiply the match formula by your pay, then compare against the employer contributions line. Under by more than a few hundred dollars? You left free money on the table, usually by front-loading deferrals and coasting past match periods, or by deferring too little.
Minute Three: Fee Drag
Find the expense ratio column. A fund at 0.05% is nearly free; 1.00% costs twenty times more and compounds against you for decades. On a $100,000 balance, the difference between 0.10% and 1.00% is roughly $900 a year — every year. Statements now summarize total asset-based fees in dollars; read the dollar figure, not just the percentage.
Minute Four: Allocation Drift
The statement lists each fund as a percentage of the whole. Compare with your target mix. A 90/10 stock-bond plan that drifted to 78/22 as stocks grew is taking less risk than you chose — which usually means lower expected returns. Rebalancing back to target, ideally inside the account where sales are not taxable, resets it.
Minute Five: The Borrow Line
If the statement shows an outstanding loan, note the balance, rate, and repayment. A 401(k) loan is your own money borrowed from yourself, but leaving the job usually makes it due fast — and an unpaid balance becomes a taxable distribution, sometimes with the 10% early-withdrawal penalty stacked on top.
Five minutes, four times a year. The statement will not manage your account, but it tells you exactly where the leaks are.
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