Not necessarily, it depends on the rules of your particular plan. In some plans, participants decide how their own contributions will be invested, but the company decides how to invest the employer contributions. In other plans, employer contributions are invested in the same proportions as the participant contributions. Further, there are plans where all matching contributions are made in the form of company stock.
You should check with your company's representative regarding your specific plan.
Ultimately, this decision must be made by you. Your employer has to select investment options for the plan and continue to make sure that these options are good, prudent investments. By shifting the responsibility for deciding how the money should be invested to you, the plan sponsors avoid the liability of being held responsible for individual investments. Plan sponsors don't want to give investment advice, because they could be held liable for the outcome of the investment allocations they have suggested.
There are many sources of information about the funds offered in your plan. The information can be obtained in a number of ways.
You can request a fund fact sheet or prospectus, either from your plan sponsor or directly from the company offering the fund. All publicly traded mutual funds must have a prospectus.
If your company uses the401kstore.com, you can log on to the participant service screen and click on to the Retirement Planning Tab to obtain fund information. You can click on to the Account Inquiring Tab to obtain fund performance and fund prices.
There are also some great mutual fund information resources on the Internet like Microsoft Investor, Individual Investor Online, Yahoo Finance, CBS Marketwatch and CNBC, just to name a few. You can also check your local public library's investment reference. Financial magazines are another useful place to look for mutual fund information.
Most employers choose to comply with voluntary guidelines established by the Department of Labor that stipulate that plans must offer at least three distinct investment options with substantially different risk/return objectives.
The range of investment options commonly offered in 401(k) plans include a multitude of fund types which could include some of the following:
- money market funds
- government bond funds
- income (bond) funds
- growth and income funds
- growth funds
- aggressive growth funds
- balanced funds
- index funds
- international funds
- life cycle funds
- company stock funds
No. The money in your 401(k) account is subject to investment risk (fluctuation in return). How much your 401(k) account is worth when you retire depends entirely on the amount of your contributions and the performance of your investments. It is possible to lose money if your investments do badly.
There are many types of risk in investing. Generally, when you hear someone talking about "investment risk" they're referring to market risk (or short-term risk), which is the fluctuation in an investment's value. Investments with wide swings in value (potential for very high gains but also for very high losses) are said to be high-risk, while those with more stable values are said to be low-risk.
You must decide how comfortable you are with the possibility that your investment value will fluctuate. This is called risk tolerance and knowing how much risk you can stand is a crucial first step in developing an asset allocation. Asset allocation is choosing the right mixture of different asset types (stocks, bonds, and cash investments) to meet your financial goal.
Generally, the two biggest factors affecting a person's risk tolerance are personal temperament and your investment time horizon. Therefore, you must invest in a variety of asset classes, security types and industries in order to reduce risk exposure while striving for substantial rewards. This procedure is called diversification. Diversification does more than just reduce risk. An intelligently diversified portfolio will nearly always outperform a single investment.
Yes. How often depends on how frequently the plans' recordkeeper values the account (reconciles the various investment gains and losses). Valuation can be performed annually, semi-annually, quarterly, monthly, or even daily. You can only change investments when the account is valued.
You can access your account on the World Wide Web by logging onto the website www.the401kstore.com or call toll free 1-866-721-401k if your company uses this service. See instruction on website.