My monthly 401K statement looks like this (example)
Previous Balance $10,000
Your contribution: $100
Employer contribution: 100
Change in Market value: -50
Final Balance: $10,150
But everyonce in a while, it will have “fees.” But these “fees” apparently add to my balance. Everything I can find online say fees are bad and take away value. What is going on here?
So it looked like this this month:
Previous Balance $10,000
Your contribution: $100
Employer contribution: 100
Change in Market value: -50
Fees: $10
Final Balance: $10,160
Why do “fees” add to my balance? Does anyone have any idea what this is?
Oh just to add, I also periodically have a item that says “Dividends and Interest.” It is usually much larger than “fees” but it does NOT add to my balance.
Also, my company uses Fidelity for its 401k, if that helps.
Does your employer have a vesting schedule for the company matches? That is, you have to work there a certain number of years before you get to keep all of the company match?
Typically forfeited matches are used to pay for administrative expenses and fees. They can be distributed to other participants. Maybe when your plan’s forfeitures exceed fees, they credit participants with a “negative” fee.
The dividends don’t add to your balance because the value of your mutual funds goes down by the same amount when they pay a dividend. If it sounds like a zero-sum exercise that doesn’t make a difference, the slight significance is that people who automatically re-invest their dividends end up owning more shares in that particular fund than people who take the dividends in cash.
It doesn’t matter in a tax-deferred account like a 401(k) or an IRA because dividends are not taxable until, possibly, they are distributed from the tax-deferred account, but if these same funds are available to investors in a non-retirement account, it is done for tax reasons. Normally, if you owned stocks or bonds (or other investments) directly as an individual or a corporation, you have to pay tax on any capital gains you earned as a result of trades or on any dividends or interest you received from your investments. But mutual funds are tax-exempt if they pass through at least 90% of their capital gains and dividends and interest to their shareholders. Then the share owners pay the tax instead, if applicable.
Well, I don’t think it has anything to do with forfeited matches because my company does not match contributions. It just gives a straight percentage to everyone.
It does use a vesting schedule. I have been vested for several years now.
Same thing. When other employees quit before they are fully vested, the money they lose has to go somewhere. Some employers set up their plans so that the money goes to the remaining employees, vested or not.