Do You Know How Much You've Saved in Your 401(k)?

A clear glass jar that says 401k on its side is tipped over with money tumbling out.

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A major perk for many of us when deciding whether to work for an employer is their retirement savings program — or lack thereof. A 401(k) is a tax-advantaged retirement plan that allows employees to contribute a certain percentage of their paycheck into a subsequent individual account sponsored by their employer. With the end of the year approaching fast, now is a great time to check in on your retirement plan, specifically your 401(k).

A recent Retirement Security Survey conducted by Principal Financial Group found that around 6 in 10 respondents, or a stark 59%, wrongly believed they were contributing to a 401(k) retirement plan. The survey also suggests that a lack of understanding when it comes to eligibility requirements and enrollment is largely contributing to lower participation rates. Unfortunately, ignorance isn’t bliss when it comes to financially securing your future, and the following four steps can help you get started.

1. Review and understand eligibility requirements and check enrollment status

According to Principal’s survey, 22% of respondents said they weren’t sure if they were eligible to participate in their company’s retirement program. The report says some of this could be due to differing enrollment processes from previous jobs.

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For example, they may have been automatically enrolled in a retirement plan from a former employer — assuming that’s how every plan works. Requirements for various plans can be hard to understand, so consult with your human resources department if you have questions.

2. Know how much you should contribute

Once you’re enrolled, you’ll need to decide how much you should contribute to this retirement account each pay cycle. If you’re lucky enough to receive an employer match, know up to what percentage they match and contribute that amount if you can.

A financial adviser can help you determine an amount that suits your individual needs. (To find out the contribution limits for 401(k)s, see the article Higher IRA and 401(k) Contribution Limits for 2024.)

3. Check your balance

This might be less important for younger workers, but as you get closer to retirement, it’s important to review your balance quarterly. Not knowing your balance can make it hard to know whether you’re on track to meet your retirement goals. The last thing you want is to misjudge your ability to afford retirement, potentially forcing you to work longer than originally planned, or return to work after reaching retirement.

Similarly, if you’re younger, it’s a good idea to know how much you’ve saved each year. This is a great benchmark for kickstarting your retirement plan — helping you understand the rate at which you’re saving.

From there, you can explore other retirement savings vehicles to help you reach your goals. (To find out how your balance compares to others’, see the article The Average 401(k) Balance by Age.)

4. Set a savings goal

If you’re contributing to a 401(k), you should be setting a savings goal. Without one, you may be saving erratically. A financial professional can review your specific plan in comparison to your paycheck to help you determine the appropriate amount to contribute each pay period.

We spend a sizable amount of our lives working — not only to be able to afford the cost of living today but, hopefully, to enjoy some much-deserved freedom in our retirement years. Now is a good time to review your plan, or start creating one if you haven’t.

Cynthia Pruemm is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. SIS Financial Group is a separate entity and not affiliated with CoreCap Advisors. The information provided here is not tax, investment or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Cynthia Pruemm, Founder and CEO of SIS Financial Group, specializes in financial planning, asset protection and transitional planning. Prior to starting SIS Financial Group, Cynthia served as State Director for two of America’s largest senior market agencies, where she also served as a member of the Chairmen’s Council and met her husband, Hagen. Because of their shared desire to help people during the next chapter in their lives, they founded SIS Financial Group.