My 401k fund has an option for investment in S&P 500 index fund, however the investment doesn't come with any dividend yield. S&P 500 index funds such as VOO, SPY come with a dividend yield. Do you know whether S&P 500 index funds available in 401k come with a dividend? If not, I am wondering where the dividend goes - if I put the same money in individual brokerage account for index funds, I would get higher yield than what I would get in 401k account.

  • 6
    probably reinvested, read the prospectus. Why would you want dividends in your 401k?
    – littleadv
    Jun 17, 2022 at 20:36
  • I would like if it gets reinvested, however there is no dividend yield.
    – ewr3243
    Jun 17, 2022 at 21:24
  • What fund is it?
    – littleadv
    Jun 17, 2022 at 22:01

2 Answers 2


Is the S&P 500 index fund a mutual fund? With a mutual fund, dividends a̴r̴e̴ ̴u̴s̴u̴a̴l̴l̴y̴ ̴(̴m̴a̴y̴b̴e̴ ̴a̴l̴w̴a̴y̴s̴?̴)̴ can be automatically reinvested without the dividends showing up on your statements.

With an ETF, you will see the dividends on your statements even if they are reinvested.

Either way, your are still getting the dividends.

  • -1 The last part of the second sentence in this answer is false. Jun 19, 2022 at 2:25
  • @DilipSarwate, please let me know if you think the above edit makes this answer accurate.
    – minou
    Jun 19, 2022 at 16:17
  • The edit improves the answer to some extent, but the assertion "without the dividends showing up in your statements" is incorrect. Each quarterly or monthly statement will show the entire activity for that period, including e.g. payroll deductions received and invested in the mutual fund and how many shares were purchased as a result. Ditto the dollar amount of the dividends were paid by the mutual fund and reinvested in the fund and how many shares were purchased as a result. Mutual fund shares can be bought and sold in fractional quantities, e.g. 22.019 shares. Continued...... Jun 19, 2022 at 16:37
  • (Continuation)... In contrast, ETF shares are always integer numbers. It is true that if the 401(k) or IRA plan is held in a brokerage, the brokerage house might allow investment in fractional shares of a ETF, but then, the brokerage house is holding ETF shares for all participants in the 401(k) plan in "street name" as well as investments of its own, and as long as the sum of all these is an integer, there is no problem. So, the claim that "with ETFs you will see dividends" is misleading. It doesn't happen with all 401(k) plans; only those held in brokerages who offer the service, Jun 19, 2022 at 16:50

Although the answer by google-cloud is perfectly satisfactory to the OP, it is nonetheless incorrect in several places.

Mutual funds, including index funds, have the choice of

  • paying out the dividends that they collect from the stocks that they hold to their shareholders, and then the shareholders pay income tax on the money that they receive (unless their investment is inside a tax-deferred plan),


  • pay income tax on the dividends since that money is taxable income to the mutual fund.

Almost universally, mutual funds choose to distribute the dividends to their shareholders and pass on the tax burden to their shareholders. The share price of the mutual fund shares (the Net Asset Value or NAV as it is called) falls by the dividend paid per share. Now, each shareholder has the option of reinvesting the dividends in the same fund instead of getting cash from the mutual fund, and in many cases, this is the default option when the account is set up. Re-investing in the fund means that the shareholder now has more shares than before, but since the NAV is smaller, the shareholder who looks at his holdings will see no change in the dollar value of his holding in the mutual fund. But, regardless of whether the shareholder reinvests the dividend or takes it in cash, that dividend is (dividend) income to the shareholder, and income tax must be paid on it unless the mutual fund is held in a tax-deferred plan.

In 401(k) plans and IRAs and such, re-investment is the default option since a cash payment to the account owner would be a distribution from the tax-deferred plan, and possibly subject to penalties for premature withdrawal etc, but reinvestment is not mandatory. Many 401(k) plans, IRA agreements etc allow the dividend payout to be invested in a different mutual fund within the plan. But, either way, google cloud's claim that dividends don't show up on 401(k) statements is not true; dividends do show on 401(k) plan statements as do the number of shares that are purchased as a result of reinvestment of the dividends.

  • 1
    there's a third option: the investment options in the 401k can be structured as trusts, and then the dividends will not show up on the account just as @google-cloud-sucks described. In fact, it is not uncommon for 401k plans to do this, and while regular traded trusts would issue K-1s to the participants, in 401k it is unnecessary.
    – littleadv
    Jun 20, 2022 at 6:29
  • To help you know whether littleadv's comment applies to any given 401(k) option, "CIT" = "Collective Investment Trust"
    – Ben Voigt
    Jun 20, 2022 at 19:18

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