Review your 401(K)

Last updated: January 1

It's never too early to start planning for retirement. A well-planned retirement can spell the difference between comfort and struggle in your later years. Many employers no longer offer company managed pension plans, but rather provide 401(k) retirement plans that allow you to choose where your investment dollars go. It typically takes some effort to ensure maximum returns.

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What needs to be done:

Your 401(k) needs to be reviewed to ensure proper allocation of your retirement funds. Be sure to consult a financial professional should you have any questions.

Why do it?

  • Financial markets are constantly changing
  • Allows portfolio optimization
  • Enables risk exposure to be altered for improved performance
  • Aids tracking of investment growth/loss
  • Allows asset allocation changes from equities to low risk investments, like blue chip corporate bonds

How often?

There are several schools of thought when it comes to re-balancing your 401(k) plan, according to the New York Times:

Rebalancing Options
Definition

Automatic

This is a standard feature of some 401(k) plans. This type of 401(k) plan will automatically re-balance at a given date. It is optimal if you have already set up the proper investment mix.

Indicator-based

This means whenever your statements reveal your 401(k) is down by a certain percentage — 5 percent, for example.

Professionally managed

Online brokers provide professional review and rebalancing of your 401(k)for a fee. There are several low-cost services that will provide this for you.

Time-based

This means reviewing and re-balancing your 401(k) at specified time periods. For example, mutual fund giant Vanguard recommends that you review your 401(k) once or twice a year.

How to do it:

Whether you choose to revisit your 401(k) yearly or every six months, it's basically a chance to examine your investments and readjust them to maximize your return. When you're choosing how to allocate your money, the best thing to do is to consult the advice of a financial professional.