Retirement Planning For Dummies
Book image
Explore Book Buy On Amazon
Many employers tout their 401(k) plans as a job perk. But, typically, you're on your own when it comes to setting up online access. In some ways, this situation is symbolic of how the responsibility for retirement planning has shifted to employees. Not only do employers want to scale back how much they contribute to your retirement, many don’t even want to help you manage the account.

How to register for 401(k) access

Most 401(k)s are established on paper. The paperwork you sign when you join a company opens the account and gives the 401(k) plan administrator the right to take money out of your paycheck.

But you can’t do much with the account until you register for online assess with the 401(k) plan site. After that, you can see your balances, make changes, and evaluate how you’re doing.

You might be surprised at some of the online tools you can pick up right from your 401(k) plan provider. Nearly all 401(k) sites offer useful calculators and information to help you better prepare for retirement.

What kicks off the process of setting up 401(k) account access? Ironically, it’s probably snail mail. At some point after starting a job or signing up for a 401(k), you should get a letter in the mail from your 401(k) administrator with your summary plan description. This document, similar to the one shown, lets you know that the account is established and that you can set up online access.

summary plan description Your summary plan description tells you it’s time to set up online access.

If you look closely, you’ll see a website address in the upper-right corner of the summary plan description in the figure. In this example, it’s From here, you’ll want to follow these steps to register:

  1. Click the Register Now button. Just about all 401(k) sites put the button just below the log-in section, as you can see in this figure for the Voya example.

    Register Now Find the Register Now or a similar option.
  2. Choose an identification method. Sites usually ask for either your personal identification number (PIN) or your Social Security number and date of birth. The PIN would have been sent to you in the mail. If you didn’t get a PIN, go with door #2, because you know your Social Security and birthday.
  3. Create your log-in information. You are asked to choose a username and password. Try to choose something difficult to guess—or better yet, use a password manager.

Passwords are getting more complicated in an effort to keep hackers out. Choose a password that’s not a real word, and use a string of symbols, numbers, and uppercase and lowercase letters. Try to come up with something only you will know. For example, suppose you’re a Star Wars fan. Rather than using starwars as a password, use MT4ceBWY. (Get it? May the Force be with you.)

Get to know your 401(k) tools

The beauty of 401(k) plans is their hands-off nature. If you’re like many 401(k) investors, after you sign up for the plan, you don't want to think about it—and you certainly don't want to do is dig around the various features of the 401(k) provider’s website.

But you might be surprised at some of the online tools you can pick up right from your 401(k) plan provider. Nearly all 401(k) sites offer useful calculators and information to help you better prepare for retirement.

Using the tools on your 401(k) plan provider’s site is helpful because you already have log-in information with them, and many of the tools can be personalized because your details are already there.

A few helpful tools to look for on your 401(k) plan provider’s site follow:
  • Calculators: Most 401(k) providers will use your account details as inputs for calculators. You’ll likely find a contribution calculator that will tell you if you’re putting enough in your 401(k) to meet your full-year contribution goal. This tool is useful if you want to max out your 401(k), putting in the most legally allowed. The tool will also tell you what percentage you should take out of your paycheck to hit your annual contribution target.

Also look for a retirement overview calculator. This tool helps you see how much money you should have when you retire based on your savings rate, income needs, and rate of return.

Lastly, 401(k) providers offer retirement income estimate calculators. These tools look at how much you’re saving and your expected returns, and estimate how much income you might expect in retirement.

  • Investing education: You’ll likely find useful articles and videos to coach you on the importance of diversification and asset allocation. You might also find information on related topics such as estate planning.
  • Risk questionnaires: Some 401(k) sites feature basic questionnaires that will help you see how much risk you can handle. You’ll be asked how much you know about investing, how much volatility you can handle, and your age.

Some 401(k)-planning sites use this information, paired with what the plan administrator already knows about you, to offer a possible asset allocation, as shown. Your asset allocation is the mix of asset classes expected to give you the best return for your level of risk.

recommended portfolio Voya’s questionnaire recommends a portfolio based on what it knows about you.

Typically, your appetite for risk is a function of how much volatility, or ups and downs in portfolio value, you can endure. For example, suppose that the target-date fund for your retirement year suggests a middle-of-the-road portfolio of 60 percent stocks and 40 percent bonds. But after taking the questionnaire, the 401(k) provider’s site might suggest a more aggressive portfolio with 70 percent stocks and 30 percent bonds.

Check out your 401(k) performance

Before you think about making your 401(k) work better for you, it’s wise to see how it’s doing so far. 401(k) provider sites help you track how much return you’re getting on your money.

Measuring investment performance is important and something you should count on from your 401(k) provider. The results of the calculation tell you if your investment choices are delivering what you need to reach your goals. Performance statistics also tell you if you’re getting results that are at least keeping up with the average. If your portfolio returns are less than market returns, or indexes, that’s a big sign that you should optimize your 401(k).

Most 401(k) sites will help you see your portfolio performance in two ways:
  • At the fund level: Nearly all 401(k) plans have an Investments section. Here you can look up how the funds have performed over various time periods, including short periods (such as a month or year) and longer periods (such as five or ten years). The data is typically shown in a table like the one shown here.
investments section The Investments section shows you how each of the individual investments in the plan have done.

If you own only the 401(k)’s target-date fund, look up your particular fund in the investments list. This might be all the information you need to know how you’re doing.

  • As a personal rate of return: 401(k) providers don’t just tell you how the funds in the plan have performed. They also keep track of how you have done.

What’s the difference between the funds’ returns and your returns? Keep in mind that some investors spread their portfolios over multiple funds. They might also move money from one fund to another. The timing of your contributions matter, too. The personal rate of return incorporates all these factors to arrive at your total return.

About This Article

This article is from the book:

About the book author:

Matt Krantz is a nationally known financial journalist who specializes in investing topics. He's personal finance and management editor at Investor's Business Daily. He's also worked in the financial industry and covered markets and investing for USA TODAY. His writing on financial topics has also appeared in Money magazine, Kiplinger's, and Men's Health. Krantz is the author of Fundamental Analysis For Dummies and co-author of Investment Banking For Dummies.

This article can be found in the category: