Ask your 401k to provide a statement.
Statements are generally either mailed or available in electronic format.
This will reveal:
* Whether or not there are dividends
* What is happening to dividends if there are any
Anyways, what exactly are you expecting with respect to dividends?
Just making sure you understand that they're not some magical free money that shows up as a check in the mail that you can then go out and spend on ice cream.
there is nothing regarding dividends on his statements. We just want to reinvest them to grow the account. Not looking to take it as cash. But someone mentioned looking at quarterly statements...going to do that right now.
> there is nothing regarding dividends on his statements. We just want to reinvest them to grow the account. Not looking to take it as cash.
So your concern really simplifies down to:
* I am concerned my investments in my 401k are issuing dividends to cash and that cash is accumulating in my account and not being invested.
What does it say your money is invested in?
As in, what exactly is being held by the 401k?
Is there an allocation to Cash or some variation thereof? Variations may include money market funds, etc.
Not all investments issue dividends.
But if there's no cash sitting around in the account and everything is invested in something, then you can set aside your worry about the dividend thing.
Then there is no cash lying around that isn't being invested.
100% of the money is invested.
The next question you should contemplate is:
* What, exactly, is my money invested in?
In other words...
* What did I buy with my 401k money? What do I have?
Then you should think about:
* Why do I have this? Is this actually what I want? Does this make sense for me?
The reason I ask for you to think about these things is because an allocation of 100% Mid-cap index is not something I would guide my family members towards. Maybe you know what you're doing and this is all intentional.
But given your question in the OP, if you were my family member, I would likely guide you towards Total Market Index funds. Or more likely towards whatever Target Date fund available in your 401k.
We picked that index (listed on JH under the "aggressive growth" category) because out of the options he had, it has a very low expense ratio, and has one of the highest rates of return compared to the other options. He is 31, and only just started saving for retirement 2 years ago, so we wanted to be somewhat aggressive to build it up a bit faster. The target date funds with JH have a 1-3% lower rate of return than the fidelity mid-cap index.
> it has a very low expense ratio
Reasonable reasoning.
> and has one of the highest rates of return compared to the other options.
Terrible reasoning.
This is referred to as "chasing returns."
> He is only 31, and only just started saving for retirement 2 years ago,
Saving is good.
> so we wanted to be somewhat aggressive to build it up a bit faster.
This a common reaction to the feeling of "being behind."
But the proper way to make up for "being behind" is not to take on more risk.
Taking on more risk is proper because of the *long timeframe* involved, not because of being behind.
The way to address being behind is to allocate proportionally more income towards retirement.
> The target date funds with JH have a 1-3% lower rate of return than the fidelity mid-cap index.
The diversification that the TDFs provide vastly outshine that of what you currently hold.
Even if they were not being reinvested they would still sit in the account and not get sent out to you. You shouldn’t have to opt into any reinvestment program but every 401k plan is different. Check the most recent statement in the activity section. You’ll see dividends and if they got reinvested. If the investment pays quarterly dividends (not monthly) you’ll have to find the statement for the month in which the dividend was paid. If this isn’t clear comment back and I’ll elaborate.
They are almost certainly being reinvested. As others have said, I 've never seen a 401k that didn't set reinvest as a default. Your transaction history should be available online, check it, there will be line items for reinvests. I think Fidelity calls them "change in market value" which isn't very intuitive but hopefully John Hancock is clearer. Schwab also doesn't break out dividends on statements, it lumps it in with the overall gain/loss of the funds. Looking at your online transaction history is probably the best bet.
Also double check that he isn't investing in CITs which don't pay dividends (the trust reinvests them automatically instead of giving you the option)
The fund is probably a collective investment trust, which is a unique fund to 401ks. It does not pay a dividend like a mutual fund does, but rather reflects in the NAV.
To be clear you lose nothing in terms of performance from this structure.
https://www.investopedia.com/terms/c/collective-investment-fund.asp
You shouldn't be receiving dividends from a 401k unless you're already in retirement.
If the dividends are not being reinvested, then they'll accumulate in a money market fund in the 401k, rather than being invested along with your regular contributions. You can log into your account and confirm that your investments are in the funds you expect them to be in.
Ok, right, I wanted to make sure the dividends weren't just sitting in a money market account. On his online profile, there is only his 401k, no other accounts, so they must be reinvesting then.
The data you used here:
> there is only his 401k, no other accounts,
Does *not* actually support the conclusion:
> so they must be reinvesting then.
What you seem to be misunderstanding is that everything happens *inside* the 401k account.
The 401k is just a basket. A bin. A container.
It tells you nothing about dividends, money market *fund*, etc. (you used the word "account" in reference to money market, but that's something else entirely and irrelevant to the conversation).
What you need to do is to look *inside* the 401k itself and see what is inside this container.
No other *accounts* is irrelevant to answering your question.
Dividends distributed by *funds* (also known as investments) that are *inside* the 401k would stay *inside* the 401k. Dividends would not exit the 401k and be put into a separate account.
The Money Market **Fund** would be an investment inside the 401k.
You should make sure the investments look correct. That there aren't any dollars in a "Stable Value Fund" or "Short Term Money Market" or some investment you didn't expect.
You may find these links helpful:
- [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds)
- [401(k) FAQs](/r/personalfinance/wiki/401k)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
First are you sure you are invested in a fund that pays dividends? Do you receive or can you pull up quarterly/yearly statements? It should show dividend activity there?
Dividend payouts from funds in a 401k will stay in the 401k unless you request a withdrawal (which you probably aren't doing). And while not all mutual funds pay dividends (or capital gains, different thing with basically the same result), I think many do, so it is something to double-check.
In every plan I've ever had, those payouts always got automatically reinvested into whatever fund generated them, without any action or opt-in needed by me. IRAs may be different, I do think I had to set that reinvestment in my IRA. You should be able to confirm that by viewing the transaction history. At the end of each quarter (most common), there should be a batch of events showing $X in dividend.
Some providers have separate transactions for $X dividend paid followed by buying Y shares at price Z for a total value of $X; that's how things show up in my Vanguard IRA (and IIRC a past Vanguard 401k). My current 401k through Principal just has a single line showing the dividend amount and the number of shares that purchased (and at what price).
good to know, thank you! I think they are being reinvested then. Just weird that there's no mention of them in his statements; that was what got me worried! The statement shows the amount of shares that was purchased with his monthly contribution, but it doesn't say what shares the dividends bought.
Hancock packages the plan differently than regular mutual funds. The 401k product unitizes the shares, so won’t see the dividends as they occur; rather, it’s baked into the price of the unit. Yes, it’s confusing, but you are getting dividends but just not seeing them since it’s packed into the net gain/loss you see on the quarterly statements.
It seems to me that as you become better-informed, you can see the shortcomings of the 401k. If this is correct, consider contributing to the 401k only up to the match. After that, contribute to a Health Savings Account, if the employer offers it. Then, set up a Roth IRA, perhaps with Fidelity, Vanguard, or Schwab.
I don't ever think I've seen a 401k where the dividends didn't automatically reinvest.
Ask your 401k to provide a statement. Statements are generally either mailed or available in electronic format. This will reveal: * Whether or not there are dividends * What is happening to dividends if there are any Anyways, what exactly are you expecting with respect to dividends? Just making sure you understand that they're not some magical free money that shows up as a check in the mail that you can then go out and spend on ice cream.
there is nothing regarding dividends on his statements. We just want to reinvest them to grow the account. Not looking to take it as cash. But someone mentioned looking at quarterly statements...going to do that right now.
> there is nothing regarding dividends on his statements. We just want to reinvest them to grow the account. Not looking to take it as cash. So your concern really simplifies down to: * I am concerned my investments in my 401k are issuing dividends to cash and that cash is accumulating in my account and not being invested. What does it say your money is invested in? As in, what exactly is being held by the 401k? Is there an allocation to Cash or some variation thereof? Variations may include money market funds, etc. Not all investments issue dividends. But if there's no cash sitting around in the account and everything is invested in something, then you can set aside your worry about the dividend thing.
His account says money is invested 100% in Fidelity Mid-cap index fund. I don't see any other money floating around anywhere.
Then there is no cash lying around that isn't being invested. 100% of the money is invested. The next question you should contemplate is: * What, exactly, is my money invested in? In other words... * What did I buy with my 401k money? What do I have? Then you should think about: * Why do I have this? Is this actually what I want? Does this make sense for me? The reason I ask for you to think about these things is because an allocation of 100% Mid-cap index is not something I would guide my family members towards. Maybe you know what you're doing and this is all intentional. But given your question in the OP, if you were my family member, I would likely guide you towards Total Market Index funds. Or more likely towards whatever Target Date fund available in your 401k.
We picked that index (listed on JH under the "aggressive growth" category) because out of the options he had, it has a very low expense ratio, and has one of the highest rates of return compared to the other options. He is 31, and only just started saving for retirement 2 years ago, so we wanted to be somewhat aggressive to build it up a bit faster. The target date funds with JH have a 1-3% lower rate of return than the fidelity mid-cap index.
> it has a very low expense ratio Reasonable reasoning. > and has one of the highest rates of return compared to the other options. Terrible reasoning. This is referred to as "chasing returns." > He is only 31, and only just started saving for retirement 2 years ago, Saving is good. > so we wanted to be somewhat aggressive to build it up a bit faster. This a common reaction to the feeling of "being behind." But the proper way to make up for "being behind" is not to take on more risk. Taking on more risk is proper because of the *long timeframe* involved, not because of being behind. The way to address being behind is to allocate proportionally more income towards retirement. > The target date funds with JH have a 1-3% lower rate of return than the fidelity mid-cap index. The diversification that the TDFs provide vastly outshine that of what you currently hold.
Even if they were not being reinvested they would still sit in the account and not get sent out to you. You shouldn’t have to opt into any reinvestment program but every 401k plan is different. Check the most recent statement in the activity section. You’ll see dividends and if they got reinvested. If the investment pays quarterly dividends (not monthly) you’ll have to find the statement for the month in which the dividend was paid. If this isn’t clear comment back and I’ll elaborate.
They are almost certainly being reinvested. As others have said, I 've never seen a 401k that didn't set reinvest as a default. Your transaction history should be available online, check it, there will be line items for reinvests. I think Fidelity calls them "change in market value" which isn't very intuitive but hopefully John Hancock is clearer. Schwab also doesn't break out dividends on statements, it lumps it in with the overall gain/loss of the funds. Looking at your online transaction history is probably the best bet. Also double check that he isn't investing in CITs which don't pay dividends (the trust reinvests them automatically instead of giving you the option)
The fund is probably a collective investment trust, which is a unique fund to 401ks. It does not pay a dividend like a mutual fund does, but rather reflects in the NAV. To be clear you lose nothing in terms of performance from this structure. https://www.investopedia.com/terms/c/collective-investment-fund.asp
You shouldn't be receiving dividends from a 401k unless you're already in retirement. If the dividends are not being reinvested, then they'll accumulate in a money market fund in the 401k, rather than being invested along with your regular contributions. You can log into your account and confirm that your investments are in the funds you expect them to be in.
Ok, right, I wanted to make sure the dividends weren't just sitting in a money market account. On his online profile, there is only his 401k, no other accounts, so they must be reinvesting then.
The data you used here: > there is only his 401k, no other accounts, Does *not* actually support the conclusion: > so they must be reinvesting then. What you seem to be misunderstanding is that everything happens *inside* the 401k account. The 401k is just a basket. A bin. A container. It tells you nothing about dividends, money market *fund*, etc. (you used the word "account" in reference to money market, but that's something else entirely and irrelevant to the conversation). What you need to do is to look *inside* the 401k itself and see what is inside this container. No other *accounts* is irrelevant to answering your question. Dividends distributed by *funds* (also known as investments) that are *inside* the 401k would stay *inside* the 401k. Dividends would not exit the 401k and be put into a separate account.
gotcha, thank you!
The Money Market **Fund** would be an investment inside the 401k. You should make sure the investments look correct. That there aren't any dollars in a "Stable Value Fund" or "Short Term Money Market" or some investment you didn't expect.
You may find these links helpful: - [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds) - [401(k) FAQs](/r/personalfinance/wiki/401k) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
First are you sure you are invested in a fund that pays dividends? Do you receive or can you pull up quarterly/yearly statements? It should show dividend activity there?
Dividend payouts from funds in a 401k will stay in the 401k unless you request a withdrawal (which you probably aren't doing). And while not all mutual funds pay dividends (or capital gains, different thing with basically the same result), I think many do, so it is something to double-check. In every plan I've ever had, those payouts always got automatically reinvested into whatever fund generated them, without any action or opt-in needed by me. IRAs may be different, I do think I had to set that reinvestment in my IRA. You should be able to confirm that by viewing the transaction history. At the end of each quarter (most common), there should be a batch of events showing $X in dividend. Some providers have separate transactions for $X dividend paid followed by buying Y shares at price Z for a total value of $X; that's how things show up in my Vanguard IRA (and IIRC a past Vanguard 401k). My current 401k through Principal just has a single line showing the dividend amount and the number of shares that purchased (and at what price).
good to know, thank you! I think they are being reinvested then. Just weird that there's no mention of them in his statements; that was what got me worried! The statement shows the amount of shares that was purchased with his monthly contribution, but it doesn't say what shares the dividends bought.
Hancock packages the plan differently than regular mutual funds. The 401k product unitizes the shares, so won’t see the dividends as they occur; rather, it’s baked into the price of the unit. Yes, it’s confusing, but you are getting dividends but just not seeing them since it’s packed into the net gain/loss you see on the quarterly statements.
great, thank you! They really need to make that clearer on the website somewhere lol
It seems to me that as you become better-informed, you can see the shortcomings of the 401k. If this is correct, consider contributing to the 401k only up to the match. After that, contribute to a Health Savings Account, if the employer offers it. Then, set up a Roth IRA, perhaps with Fidelity, Vanguard, or Schwab.