Have a say in how your 401(k) account is invested

More than a third of working-age Americans have money in a 401(k) account, and another 18% have individual retirement accounts (IRAs). The median balance in those accounts is $30,000, according to the census.

So where exactly is all that money? Tech stocks, mostly.

Typically, people invest their 401(k) monies into funds, pooled investments that spread money across hundreds (if not thousands) of different stocks and other securities, including other funds with their own nested investments.

The Russian-nesting-doll setup helps spread out risk by investing broadly and diversely in the stock market, and it often maximizes returns by investing more heavily in reliably high-performing companies known as blue chips.

Some of the biggest retirement funds tend to have one aspect in common: a heavy emphasis on tech stocks like Microsoft, Apple, Nvidia, Alphabet (Google) and Meta, which can comprise nearly a quarter of a stock-based fund's total holdings. That roughly aligns with the market value of those companies compared to others in the S&P 500.

"Over four of the previous five years, technology stocks have outpaced the broader stock market," according to a recent U.S. Bank report. "It's reasonable to expect that technology stocks will play a role in any broadly diversified portfolio."

Depending on your age and investment strategy — the closer to retirement, the lower the risk and vice versa — there are different funds with different types of assets. Generally, more risk means more stocks, less risk means more bonds. And some funds specialize in different sectors or take a wider or more narrow sampling of the stock market.

While employer-sponsored 401(k) plans are often left on autopilot, individual investors can have a say about where the money is going.

"Your retirement-plan strategy should evolve over time along with your life stage and unique situation," said Sarah Darr, head of financial planning at U.S. Bank Wealth Management in Minneapolis. "Some investors choose to review and periodically rebalance their 401(k) plan on their own, while others take advantage of target-date funds that manage investments on the investor's behalf."

Here's how to make sure your retirement funds are in the proper place:

To find out what's in the portfolio, first find out which funds your plan invests in by logging into your 401(k) account portal, calling the plan manager or asking your employer for documentation.

"Employers' 401(k) plans are required to provide a fee disclosure notice at least once a year," Darr said. "The plan should also distribute a summary plan description and prospectus, which would likely include information on the plan's investment options."

The high-level funds often have names like Vanguard Target Retirement 2045, Schwab 1000 Index or Fidelity Freedom Index 2055. Those funds could hold a number of other investments, and only by peeling back that additional layer can you find individual stocks and bonds.

For example, the Fidelity Freedom Index 2055 invests in Fidelity Total Market Index Fund and Fidelity Global ex U.S. Index Fund. You can often find those holdings under a "composition" or "asset allocation" heading or through searching by name or ticker symbol on Fidelity's website, which will bring up a webpage with those funds' semiannual reports that contain a list of thousands of holdings and their values. The keywords to look for are "prospectus" or "constituents."

Brokerages like Schwab and financial services firm Morningstar also offer search engines that provide high-level information about funds, including their Top 10 holdings, with links to documents.

For a deeper look at what's in a fund with an emphasis on sustainability, the environmental nonprofit As You Sow built a rating system for funds and identifies which fossil fuel companies they invest in. The Invest Your Values tool came about after the nonprofit looked into its own employee retirement plan and found it offered a fund focused solely on oil pipeline companies.

"As we started to investigate, we quickly realized the immediate barrier was a lack of transparency. 401(k)-style plans usually offer a list of 10-20 plan options, but to find out what companies are held within the portfolios means searching through lots of documents," said Andrew Montes, director of digital strategies at As You Sow. "Our Invest Your Values resources and tool have expanded to cover deforestation, gender equality, civilian firearms, military weapons, the prison industrial complex and tobacco."

The group also tracks what plans major employers like Target offer and rates them.

For the full scope of investments, which can include thousands of individual holdings, look for a fund's prospectus. These public filings provide a snapshot of a fund's investments in semiannual or monthly reports and are available online or by asking an employer or fund manager. Companies also file them with the U.S. Securities and Exchange Commission.

"Ask your employer's benefits team, or your 401(k) plan manager, for more information about the specific funds offered by your plan," Montes said. "They should be able to provide links to the full prospectus of each fund offered by your plan."

As for what to do with this newfound portfolio knowledge, workplace-sponsored 401(k) plans typically have a limited menu of investments offered to employees. Some plans allow more individual tinkering, while others are less flexible.

"Investment-savvy participants looking for other options will want to see if their plan offers a self-directed brokerage option, which may give participants access to thousands of mutual funds, and in some cases, exchange-traded funds and even individual stocks," Darr said.

If that option isn't available, Montes said employees should voice their concerns as a team.

"A chorus is harder to ignore than a single voice," he said. "At the end of the day, it's your money, and you deserve a say over how it is invested."

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