Should You Change Your 401(k) Asset Allocation?

Selecting your asset allocation is one of the initial steps you’ll complete when enrolling in your 401(k) plan. You may decide to place a percentage of your money into high-risk mutual funds and a certain percentage into lower-risk investments like bond funds.

However, as time passes by and your retirement goals evolve, you may decide you want to make changes to your asset allocation. We’re breaking down everything you need to know to understand what account rebalancing is and how it works.

What does it mean to rebalance my 401(k) account?

Rebalancing your 401(k) account refers to buying and selling assets to maintain the original percentage distribution of your asset allocation. Some plan participants choose to rebalance on a set schedule to avoid additional anxiety. Working collaboratively with a financial advisor can help you relieve the stress related to account rebalancing.

When should I rebalance my 401(k) account?

When you first enroll in your employer-sponsored 401(k) account, you may choose to allocate a certain percentage of your contributions to different types of investments based on risk and return considerations. As time passes, you may find that you have significantly more or less money in one type of investment because of market fluctuations.

With the ever-changing market, you may decide that your portfolio needs an adjustment. This is where rebalancing your 401(k) account comes in.

How do I rebalance my 401(k) account?

If you want to maintain the percentage allocation of your account, a financial advisor may recommend rebalancing it.

The remedy for an out-of-balance portfolio is as simple as buying or selling some of your investments to even out the allocation percentages of your account. With the ePlan Services participant dashboard, you’ll be able to view your asset allocation and gain access to the asset allocation planner, so you can keep your 401(k) account on track.

How much does it cost to rebalance my 401(k) account?

Because you’re selling your own investments and buying new ones, you don’t need to worry about additional costs. No-fee investments may also help you avoid losing any of your own money in the process. If you have a target-date fund that automatically rebalances, then you may not need to rebalance your account yourself.

Whether your investment strategy is aggressive or conservative, it’s important to check your account periodically to understand your portfolio performance and rebalance when necessary. A knowledgeable financial advisor can be of assistance when making decisions about your asset allocation.

If you have questions about rebalancing your investment portfolio, ePlan Services has answers. Visit our Help Center today for more information and log in to your employee dashboard to review your own asset allocations.

This content is for educational purposes only, is not intended to provide specific legal or financial advice and should not be used as a substitute for the legal advice of a qualified attorney or financial professional. The information may not reflect the most current legal developments, may be changed without notice, and is not guaranteed to be complete, correct, or up to date.