Once you’ve started contributing to your 401(k) plan and funded it with investments that are appropriate for your needs, you might think you’re in good shape and that your 401(k) is now on autopilot. But that type of thinking can actually be counterproductive, because to get maximum benefits from your 401(k) plan you’ll need to revise it over time to reflect changes in your life and in the investments that make up your plan. That’s why it’s smart move to review your 401(k) holding annually, and as this year is winding down it is as good a time as any to see what you’ve got, where you’ve been and where you might be headed.

What should you look for when you review your 401(k) plan? First and foremost, make sure you’re saving enough to help reach your retirement goals or that you’re at least putting away as much as you can possibly afford. Next, evaluate whether your investment mix is suitable for your individual goals, risk tolerance and time horizon.

For example, during long bull markets, the value of your 401(k)’s stock-based accounts may have risen substantially, and you might find that these accounts now make up a greater percentage of your portfolio. As a result, you’re now taking on more risk than you’d like. On the other hand, during a bear market, the percentage of conservative investments in you plan may grow to such an extent, that your 401(k) may not be providing you with the growth opportunities you may need to pay for the retirement you envisioned. To prevent either of these scenarios, you may need to periodically rebalance your 401(k).

By making the right moves at the right time, you can help ensure that your 401(k) will be a key retirement planning tool.

I’m using the Money Merge Account System for my retirement financial planning.

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