How to Check Your 401(k)
Check your current asset allocation., Reassess your risk tolerance., Change your future contributions., Transfer money between funds.Look at how much money is in each investment fund., Consider automatic rebalancing.
Step-by-Step Guide
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Step 1: Check your current asset allocation.
Find your most recent 401(k) statement and go to the company’s website.
Most should allow you to review details of your 401(k) online by creating a username and password.
Print out the current allocation of your investments.
For example, you might have 50% in equities, 25% in bonds, and 25% in real estate.
These asset classes grow at different rates, so don’t be surprised if the current allocation doesn’t match how you allocated your contributions.For example, you might have directed 50% of your contributions to equities, but because of how fast the stock market has grown about 60% of your account might be in equities. -
Step 2: Reassess your risk tolerance.
You aren’t required to rebalance, and you should expect the market to fluctuate.
Accordingly, you don’t need to rebalance if you have a long investment horizon.
Instead, you can ride out the highs and lows.Nevertheless, you might want to rebalance if your risk tolerance has changed.
When you signed up for the 401(k), you might have taken a quiz to determine your risk tolerance.
If you can tolerate high risk, you probably placed most of your contributions into equities, including foreign or emerging market stocks.
However, if you have lower risk tolerance, you probably invested in short-term bonds, money market accounts, and certificates of deposit.
Take the quiz again, or schedule a meeting with a retirement plan advisor. , If you continue to contribute to your 401(k), you should decide whether you want to change your contributions.For example, if you want to reduce risk, you can contribute more to bonds or a money market fund.
Remember that changing your contributions won’t change the current balance of your account.
For example, if you want to reduce your exposure to equities, you’ll need to transfer money out of that fund. , For example, you might have too much in small cap equities.
You can rebalance your 401(k) by moving money out of this fund and into a different fund. , You can rebalance automatically if you use lifecycle funds, which are also called “target date funds.” Over time, the allocation slowly changes to reflect a shift in focus from seeking growth to preserving principal.You can choose a lifecycle fund based on its name.
For example, a fund called “Fund 2040” is appropriate for people who anticipate retiring in
2040.
Of course, you need to do proper research before investing in a lifecycle fund.
Find out the fees, historical performance, and risk level. -
Step 3: Change your future contributions.
-
Step 4: Transfer money between funds.Look at how much money is in each investment fund.
-
Step 5: Consider automatic rebalancing.
Detailed Guide
Find your most recent 401(k) statement and go to the company’s website.
Most should allow you to review details of your 401(k) online by creating a username and password.
Print out the current allocation of your investments.
For example, you might have 50% in equities, 25% in bonds, and 25% in real estate.
These asset classes grow at different rates, so don’t be surprised if the current allocation doesn’t match how you allocated your contributions.For example, you might have directed 50% of your contributions to equities, but because of how fast the stock market has grown about 60% of your account might be in equities.
You aren’t required to rebalance, and you should expect the market to fluctuate.
Accordingly, you don’t need to rebalance if you have a long investment horizon.
Instead, you can ride out the highs and lows.Nevertheless, you might want to rebalance if your risk tolerance has changed.
When you signed up for the 401(k), you might have taken a quiz to determine your risk tolerance.
If you can tolerate high risk, you probably placed most of your contributions into equities, including foreign or emerging market stocks.
However, if you have lower risk tolerance, you probably invested in short-term bonds, money market accounts, and certificates of deposit.
Take the quiz again, or schedule a meeting with a retirement plan advisor. , If you continue to contribute to your 401(k), you should decide whether you want to change your contributions.For example, if you want to reduce risk, you can contribute more to bonds or a money market fund.
Remember that changing your contributions won’t change the current balance of your account.
For example, if you want to reduce your exposure to equities, you’ll need to transfer money out of that fund. , For example, you might have too much in small cap equities.
You can rebalance your 401(k) by moving money out of this fund and into a different fund. , You can rebalance automatically if you use lifecycle funds, which are also called “target date funds.” Over time, the allocation slowly changes to reflect a shift in focus from seeking growth to preserving principal.You can choose a lifecycle fund based on its name.
For example, a fund called “Fund 2040” is appropriate for people who anticipate retiring in
2040.
Of course, you need to do proper research before investing in a lifecycle fund.
Find out the fees, historical performance, and risk level.
About the Author
Gregory Thompson
Creates helpful guides on lifestyle to inspire and educate readers.
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