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Portfolios 202: How Your 401(k) Plan Works

Introduction to How Your 401(k) Plan Works 401(k) Plans versus Traditional Pensions Understanding the Details of Your 401(k) Plan Finding the Right Mix for Your 401(k) Summary of How Your 401(k) Plan Works
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Understanding the Details of Your 401(k) Plan

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Understanding the Details of Your 401(k) Plan

Every 401(k) plan has an excruciating legal description, called the plan document. No need to pore over that. Focus instead on the summary plan description (SPD). That document explains how your plan operates.

Things To Know

  • Read the summary plan description.

Look for the answers to these questions:

  1. How long do you have to work for your employer before you’re eligible to participate in the 401(k) plan? Some companies let you start immediately, while others make you wait.
  2. How much of your salary can you contribute? The limit is set by law, but some plans have a lower ceiling based on a percentage of employees’ salaries.
  3. How much of your contribution will the company match? Most employers complement what their employees stash away.
  4. What are your investment options? Most plans include mutual funds, and some have individual stocks—usually the employer’s.