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When should you rebalance your 401(k)?

Your 401 plan is an excellent retirement-savings vehicle — so don’t let it “stall out.” How can you help keep your 401 moving forward? For starters, make sure you periodically rebalance the investments within your plan.

Fortunately, you’ll find that you’ll have plenty of opportunities to do just that. In recent years, 401 plans have begun offering participants an increasing number of investment choices. Also, most plans allow you to make changes frequently — as often as once a day. You may not require this degree of flexibility, but it’s nice to know it exists.

Unfortunately, many people adjust their 401 only when one or more of their investments has lost value. To compensate, they often switch some of their money into the more conservative choices. This could be a mistake. Remember, your 401 is designed to help you build resources for retirement, so you will want your money to have the chance to grow — which means you should allocate a good percentage of your 401 holdings in those accounts made up of stocks.

When Should You Make Changes?

So, how often should you review your 401? At least once a year — and every time you experience a significant life event. For example, if you get married, and your new spouse also has a 401, you may want to make sure your 401 holdings complement, rather than duplicate, those of your spouse.

You also may need to make some changes when you encounter any of the following situations:

Todd Tidball's picture
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