By James Walker — CFP® candidate, Boston MA · Updated January 2026
Most workers never actually read their 401(k) statement. They glance at the balance and move on. As a CFP candidate I have helped friends review their statements and there is almost always something worth catching – wrong contribution rate, undervaluing the employer match, holding a too-expensive fund, no beneficiary designated. Here is how to read each section.
What sections are on a 401(k) statement?
Most US 401(k) statements (Fidelity, Vanguard, Empower, Principal, T. Rowe Price, etc.) contain: account summary with current balance and period-over-period change, contributions detail (employee + employer + rollover), vesting status, investment allocation by fund, fees and expenses, beneficiary designation, rate of return, and projected retirement income.
How do I verify my contribution rate?
Check the employee contribution year-to-date. Divide by your year-to-date gross pay. The result should match the percentage you elected. If it does not match, payroll may have an error – contact HR. Common issues: contribution rate was reset after a benefits open enrollment, or the cap is being miscalculated for high earners hitting the $23,500 limit early.
What is vesting and why does it matter?
Vesting is the percentage of employer contributions you actually own if you leave. Common vesting schedules per Department of Labor:
- Immediate vesting: 100% yours from day one (common at tech companies and Safe Harbor plans)
- 3-year cliff: 0% before year 3, then 100%
- 6-year graded: 0% year 1, 20% year 2, 40% year 3, 60% year 4, 80% year 5, 100% year 6
- 2-6 year graded: common variant
Your employee contributions are always 100% vested – they are your money. Only employer match dollars are subject to vesting. If your statement shows $20,000 in employer contributions but you are 40% vested, only $8,000 is actually yours if you leave today.
What expense ratios should I look for?
Each fund in your 401(k) charges an expense ratio – the percentage deducted annually from your balance to pay the fund manager. Target-date funds and index funds should be under 0.20%. Actively managed funds often charge 0.50-1.50%. Per SEC mutual fund education, even 1% difference in expense ratio compounds to massive differences over decades.
Example: $100K invested at 7% for 30 years grows to $761K at 0.10% ER vs $574K at 1.10% ER. The 1% fee difference cost you $187,000.
What administrative fees show on my statement?
The 408(b)(2) and 404a-5 disclosures (required since 2012) show all 401(k) plan fees: investment fees (expense ratios), administrative fees (recordkeeping, audit, legal – typically $30-300/year flat or 0.05-0.40% AUM), and individual transaction fees (loans, distributions). Look at the annual fee disclosure your employer sends – 401(k) costs vary wildly between plans.
What is my asset allocation?
The investments section shows what percentage of your balance is in each fund. Verify it matches your intended target allocation. Common issue: you elected 100% target-date fund but a previous default put 50% in money market – check that your current contributions are flowing into the right fund.
For most 30-40 year olds, an appropriate allocation is 80-100% stock index funds. Money market or stable value funds should not exceed a few percent in your prime accumulation years.
Is my beneficiary current?
Per ERISA, 401(k) beneficiaries override your will – whoever is named on the 401(k) inherits the account regardless of what your will says. Married participants in non-community-property states default their spouse as beneficiary; the spouse must consent in writing to designate anyone else. Common failures: ex-spouses still listed years after divorce, deceased parents listed, no beneficiary at all.
What is the rate of return section?
Most statements show personal rate of return for the quarter, year-to-date, and one/three/five year. Compare to your benchmark – for an S&P 500 fund, compare to the S&P 500 total return. For a target-date fund, the issuer typically provides a relevant benchmark. Significant underperformance suggests fund quality issues or fee drag.
What does the “projected retirement income” projection mean?
Required since 2022 per the SECURE Act, statements must show your account balance translated into estimated monthly lifetime income at retirement. This uses standard actuarial assumptions and is meant to give a reality check on retirement readiness. The projection often surprises workers who see their $200K balance translates to roughly $1,000/month – meaningful but not enough.
What should I check on every statement?
- Contribution rate matches your election
- Employer match is being received at the correct percentage
- Asset allocation matches your target
- Expense ratios on your funds are under 0.30% (under 0.20% ideal)
- Beneficiary designation is current
- Vesting schedule and current vested percentage are correct
- No unexpected fees or distributions
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Frequently Asked Questions
What happens to my 401(k) if I quit?
Four options: leave it with the old employer (if balance over $7,000 in 2026), roll over to your new employer’s 401(k), roll over to a Traditional IRA, or cash out (terrible idea due to 10% penalty + ordinary income tax). Per IRS, a direct trustee-to-trustee rollover is tax-free and the best option. Avoid the indirect rollover where they cut you a check – 20% withholding complications.
How do I find lost 401(k) accounts from old employers?
Check with old employers’ HR departments, search the Department of Labor’s abandoned plan database, use the National Registry of Unclaimed Retirement Benefits, and check state unclaimed property databases. The Pension Benefit Guaranty Corporation also maintains a missing participant program. Roll lost accounts into a Traditional IRA to consolidate.
Can I contribute to both 401(k) and Roth IRA?
Yes. The $23,500 401(k) limit is separate from the $7,000 IRA limit. A high earner can max both ($30,500 total). However, Roth IRA contributions phase out at high incomes ($161,000 single / $246,000 married MAGI in 2026 – verify current with IRS). Backdoor Roth conversions can work around the phase-out.
Should I take a 401(k) loan?
Almost never. While 401(k) loans avoid taxes/penalties at the time, they have significant downsides: lose tax-deferred growth on the borrowed amount, must repay within 5 years, must repay in full within 60-90 days of leaving the employer (or treated as distribution), and double-taxed (repaid with after-tax dollars that will be taxed again when withdrawn). Use it only as a last resort.
What is the difference between a Roth 401(k) and a Traditional 401(k)?
Traditional: contributions are pre-tax (lower taxable income now), withdrawals are taxed as ordinary income in retirement. Roth: contributions are after-tax (no current deduction), qualified withdrawals are tax-free in retirement. Both have the same $23,500 contribution limit, and you can split between them. Younger workers in lower brackets typically benefit more from Roth.
Final thoughts from a CFP candidate
The 401(k) is the most powerful retirement tool available to most US workers, and it is also the most ignored. Spending 15 minutes per quarter reviewing your statement will catch issues, save fees, and keep your retirement planning honest.
The biggest 401(k) wins I see in case studies: capturing the full match (free money), choosing low-cost index funds, keeping employer stock under 10% of the balance, and consolidating old 401(k)s into IRAs after job changes. None of these require sophistication – just attention.
