A 401(k) plan is a cornerstone of retirement savings for many Americans, providing a tax-advantaged way to grow your primary savings source. However, it’s not a set-it-and-forget-it situation. Here’s a simple, step-by-step guide to help you perform a 401(k) account checkup.
Step 1: Gather Your Information
Before you start, gather all necessary information:
- Your latest 401(k) statement.
- Login details for your 401(k) account online portal.
- Any relevant financial documents related to your investments.
- Log in to your 401(k) account online. If you don’t have an online account, contact your plan administrator to set one up.
Step 2: Review Your 401(k) Account Balance
Check your current account balance. Compare it to previous statements to see how your account has grown over time.
Step 3: Check Your Contributions
Review your contributions to ensure you are maximizing your contributions:
- Verify that you are contributing enough to take full advantage of any employer match.
- Increase your contributions if your financial situation allows. Use this handy Paycheck Contribution Calculator to determine how much.
- Consider consolidating accounts if you have multiple 401(k) plans.
Step 4: Assess Your Performance
Compare the performance of your investments to benchmarks like the S&P 500.
- Asses If your portfolio is on track to meet your goals and if it has performed as well as comparable investments over time.
- If your portfolio consistently falls short, you may need to revise your strategy.
Step 5: Evaluate Your Investment Mix
Check the allocation of your investments:
- Ensure your portfolio is diversified across different asset classes (stocks, bonds, and more).
- Adjust your allocation if necessary to align with your risk tolerance and retirement goals. Take this Risk Tolerance Quiz to determine your risk profile.
Step 6: Rebalance Your 401(k) Portfolio
Rebalancing helps maintain your desired asset allocation:
- If your portfolio has drifted from your target allocation, rebalance by buying and selling assets to get back on track.
- Leverage Bespoke, a digital advisor that customizes and automatically rebalances your investments to fit your needs. Share your details and Bespoke creates a personalized investment mix based on your age, goals, and risk tolerance.
Step 7: Check Fees and Expenses
Review the fees associated with your 401(k) investments:
- High fees can eat into your returns, so look for low-cost investment options.
- Compare the expense ratios of your funds with similar funds.
Step 8: Update Beneficiaries
Ensure your beneficiary designations are up to date:
- Life events such as marriage, divorce, or the birth of a child may require changes to your beneficiaries.
Step 9: Consult with a Financial Advisor
Think about your retirement goals and whether your current plan will help you achieve them. You might want to consult a financial advisor to get a professional opinion.
- If you are unsure about any aspect of your 401(k), consult with a financial advisor.
- A professional can provide personalized advice tailored to your situation.
Step 10: Set a Reminder for Your Next 401(k) Checkup
Regular checkups are key to staying on track. Set a reminder to review your 401(k) at least once a year, or more frequently if needed.
Performing a 401(k) account checkup doesn’t have to be complicated. By following these simple steps, you can ensure that your retirement savings are on the right path. Happy saving!
