401k Questions to Ask
Questions for HR, a benefits team or your plan administrator about a workplace retirement plan: the match and what you must contribute to earn all of it, vesting, the fund menu and what it costs, Roth contributions, loans and withdrawals, and what happens to the account when you leave. General information rather than advice about your own situation.
The questions
Open any question for the note
What is the match, and what do I have to contribute to receive all of it?
Why ask it
Ask for the formula, not the headline. A plan matching half of what you put in up to a share of your pay is a different thing from one matching every dollar up to a smaller share. Ask too whether the match is worked out each pay period, because if it is, front-loading your contributions early in the year can cost you part of it unless the plan trues up at year end.
When do the employer contributions become mine, and what does the vesting schedule look like?
Why ask it
Your own contributions are always yours; the employer's may not be yet. Some plans vest immediately, some in equal steps over several years, and some in a single step where you get nothing until a set date and everything after it. That date is worth knowing before you agree a leaving date.
Was I enrolled automatically, and does my contribution rise each year unless I stop it?
Why ask it
Automatic enrolment often starts people at a low rate that is nowhere near enough to earn the full match, and it is easy to leave it there for years. Automatic annual increases are usually helpful, so check both the current rate and whether it moves on its own, and set the figure deliberately either way.
What is the most I can contribute this year, and am I eligible for catch-up contributions?
Why ask it
Limits are set by the tax authorities and change, so ask for the current figure and whether it includes the employer money or only yours. Older workers can usually add an extra amount, and high earners in some plans are capped further by testing rules, which is worth asking about before you plan around a number.
Can I make Roth contributions here, and how do they differ from pre-tax ones?
Why ask it
Pre-tax reduces your taxable income now and is taxed when you take it out; Roth is the reverse. The decision turns on whether you expect to be in a higher or lower tax band later, and it does not have to be all one way. Also ask whether the employer match goes in as pre-tax regardless of which you choose, because it often does.
What funds are on the menu, and what does each one cost per year?
Why ask it
Ask for the expense ratio of every option in writing. The difference between the cheapest index option and an expensive actively managed one compounds into a large amount over a working life, and it is the one variable in the whole plan you control completely. If nobody can tell you the costs, that is itself an answer.
What does the plan cost in total, including administrative fees taken from my balance?
Why ask it
Fund expenses are only part of it. There may be a recordkeeping charge, a per-participant fee, or costs paid out of the funds themselves through revenue sharing. Ask for the annual fee disclosure and look for what is deducted from accounts rather than paid by the employer.
Is there a target-date fund, and is that where my money goes by default?
Why ask it
Most plans put uninstructed money into a dated fund chosen from your age, which is a reasonable default and not always a cheap one. Check the year on the fund you are in, what it holds now, and how quickly it shifts toward bonds, since two funds with the same date can be quite differently invested.
How often can I change my investments, and are there restrictions or charges?
Why ask it
Most plans allow changes freely, but some funds impose short-term trading restrictions or redemption fees. Worth knowing before you plan to rebalance. The practical answer for most people is that fewer changes are better, and knowing the rules removes the temptation to react to a bad month.
Is there a self-directed brokerage option beyond the core menu?
Why ask it
Some plans offer a window into a wider range of investments, usually with extra fees and no guidance. It is useful if the core menu is genuinely poor or lacks a low-cost broad index option. If the core menu is decent, the window mostly adds cost and opportunity to make mistakes.
Who administers the plan, and how do I see and change things in my account?
Why ask it
You want the provider's name, the login, and who at your employer can act when the provider will not. Also ask how contribution changes are actioned: some go through payroll with a cut-off date each month, which explains why a change you made does not appear.
Who is currently named as my beneficiary, and how do I change it?
Why ask it
Check rather than assume, particularly after a marriage, divorce, or a birth. The named beneficiary on the plan generally decides who receives the account, and it can override what your will says. Spousal rules may also apply, so ask what consent is needed if you want to name someone else.
Does the plan allow loans, and what happens to the loan if I leave?
Why ask it
The important part is the second half. An outstanding loan usually has to be repaid quickly after you leave, and if it is not, it can be treated as a taxable withdrawal with a penalty on top. Repayments are also made from after-tax pay, so the money is taxed on the way in twice.
Can I take a hardship withdrawal, and what would that actually cost me?
Why ask it
Ask which situations qualify, what proof is required, and whether contributions can continue afterwards. The cost is income tax, usually a penalty if you are below retirement age, and the loss of everything that money would have earned for the next twenty or thirty years.
What happens to my account if I leave the company?
Why ask it
There are normally four routes: leave it where it is, move it to the new employer's plan, move it to an individual retirement account, or cash it out. Ask whether small balances get moved out automatically, and be clear that cashing out is the expensive option because of tax, penalty and lost growth.
Can I move an old 401k or IRA into this plan, and would that be worth doing?
Why ask it
Consolidating is easier to keep track of, and a good plan with cheap institutional funds can beat what you have elsewhere. Compare the fees on both sides before moving anything, and ask for a direct transfer between providers so the money never passes through your hands and triggers withholding.
What happens to the account if I become disabled or retire earlier than planned?
Why ask it
Rules on access before normal retirement age differ between plans, and there are exceptions that let some people take money earlier without the usual penalty. Ask what applies here, and ask whether leaving the money in the plan or moving it out gives you better access, because the answer differs.
When do required withdrawals begin, and is Roth money treated differently?
Why ask it
At a certain age the law obliges you to start taking money out, and the amount is calculated for you. The rules for Roth accounts have changed in recent years, so ask what applies now rather than relying on older guidance, and ask what happens if you are still working at that age.
How does this fit with any pension or state retirement income I will have?
Why ask it
You are looking for the whole picture rather than one account: an older pension from a previous employer, state provision, a spouse's plan. This is also the question that reveals whether the plan you are in is meant to be your main retirement provision or a supplement to something else.
What guidance comes with the plan, and who pays the person giving it?
Why ask it
Plans often provide access to a representative, a tool, or a managed account service for a fee. Ask plainly whether that person is paid by the provider and whether they are obliged to act in your interest. General education is usually free and useful; a managed account can be worth it, but you should know what it costs each year as a percentage.
Working through a workplace retirement plan
Practical guidance for the conversation itself
The order to do things in
- 1Find out the match formula and set your contribution to at least the level that earns all of it. Anything less is leaving part of your pay behind.
- 2Get the plan documents: the summary plan description and the annual fee disclosure. Almost every question on this page is answered in one of the two.
- 3Check where your money is currently invested. Many people are in the default fund without ever having chosen it, and some are sitting in cash without realising.
- 4Compare the expense ratios across the menu and note the cheapest broad options. Costs are the part of future returns you can control today.
- 5Decide pre-tax or Roth on the basis of your tax band now against what you expect later, and write down why, so you can revisit the decision when your pay changes.
- 6Name your beneficiaries and check them again after any change in your family.
- 7Set a reminder once a year to review your contribution rate, your investments, and whether any old accounts elsewhere should be consolidated.
What to read, and what to look for in it
The summary plan description
The rules of your specific plan: eligibility, the match, the vesting schedule, loans, hardship rules, and what happens when you leave. It is dull and it is the authoritative answer whenever HR and a call centre disagree.
The annual fee disclosure
Lists each investment option with its annual cost, and the administrative charges deducted from participant accounts. Look for anything expressed as a percentage of assets, since those grow as your balance does, and for flat quarterly fees, which hit small balances hardest.
Your own quarterly statement
Check that the contributions match your payslips, that the employer money has arrived, and that the vested figure is what you expect. Errors happen, particularly after a pay rise or a change of provider, and they are far easier to fix in the same year.
The payslip
Confirms what is actually being deducted and whether it is going in pre-tax or Roth. This is where people discover that a contribution change was never processed, or that a bonus had no contribution taken from it at all.
Expensive mistakes
Cashing out when changing jobs
It is the most damaging common decision in workplace retirement saving: tax, usually a penalty, and the loss of decades of compounding on a balance that felt small at the time. Moving it to the new plan or to an individual account keeps it working and costs nothing.
Leaving the default contribution rate untouched
Automatic enrolment rates are set low so that nobody opts out. If yours is below the level that earns the full match, you are paying for the plan and declining part of the compensation attached to it.
Ignoring fees because the percentages look small
A difference of a fraction of a percent per year is barely visible on a statement and substantial across thirty years. It is worth ten minutes with the fee disclosure once, then a switch to the cheaper equivalent fund.
Losing track of old accounts
Balances left behind at former employers get forgotten, and providers change without your address being updated. Keep a single list of every account with its provider and login, and consolidate where the fees make it sensible.
Borrowing from the account
A plan loan is quick and quiet, and it converts retirement money into repayments from after-tax pay, with the balance falling due if your job ends. If you are considering one, price the alternatives first and check what leaving would trigger.
Assuming the plan representative is your adviser
The person running the enrolment session may be employed by the provider whose funds are on the menu. Their information can be entirely accurate and still not be advice about your circumstances. Ask who pays them, and get a second view for large decisions.
Who can answer what
- HR or the benefits team: eligibility, the match formula, vesting, payroll timing, and how to change contributions.
- The plan provider or recordkeeper: balances, fund details, statements, beneficiary forms, loans and withdrawals.
- The fee disclosure and summary plan description: anything either of the above answers inconsistently.
- A tax professional: whether pre-tax or Roth suits your situation, and the treatment of any withdrawal you are considering.
- An independent adviser paid by you rather than by the plan: how this account fits with everything else you have.