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Education Center » Don't just set it and forget it: Your 401(k) needs regular TLC

Don't just set it and forget it: Your 401(k) needs regular TLC


Putting money into your 401(k) account through automatic paycheck deductions can make investing for retirement seem effortless. But don't let the fact that it's easy lull you into thinking that you're all set.

Just because your 401(k) contribution is automatic doesn't mean you should put your account on autopilot. In fact, giving your 401(k) account the attention it deserves on a regular basis may make a huge difference in whether or not you are adequately prepared for retirement. With that in mind, here are four ways to get more actively involved with your retirement plan and help keep it on track to save for your future.

1) Make a point of taking a peek on a regular basis

It's important to check your account periodically and rebalance when necessary, to make sure your investments are still in line with your goals and properly diversified to help you minimize risk.

A myriad of work and life events can alter your financial situation—a promotion and a raise, a marriage or divorce, the birth of a child, the added responsibility of caring for an aging parent or even your retirement date getting closer. That's why it makes sense to do a regular 401(k) account review, at the very least once a year. Some people use their annual benefits enrollment period, when they are looking at their other workplace benefits, as a good reminder to review their retirement plan choices too.

Market fluctuations can cause the value of the investments in your account to change as well. So what started as your preferred mix of stocks, bonds and cash equivalents may have changed, with too much of your account in one type of investment and not enough in another. That's why it's important to check your account periodically and rebalance when necessary, to make sure your investments are still in line with your goals and properly diversified to help you minimize risk1—see item #3, "Check your investment mix periodically and rebalance if necessary," below.

2) Increase your contribution percentage whenever you can

Small increases add up over time through the power of tax-deferred compound growth (where your earnings may also grow and the value can potentially snowball). So, when you get a raise or finish paying off your school loans, use your plan's "voluntary automatic increase" feature to up your 401(k) contribution. You can schedule future increases any time you review your account online.

Regular increases are so important to the future retirement accounts of American workers that a growing number of employers are choosing programs that automatically boost an employee's contribution each year by a specified amount. "Employees can opt out of the increases, but by making them automatic, their employers are encouraging them to contribute more—and counteract their natural inclination not to make changes to their 401(k) accounts," says Jennifer Marano, director of Defined Contribution Product at Bank of America.

3) Check your investment mix periodically and rebalance if necessary

As the value of your investments changes over time, the percentages that you've allocated to stocks, bonds and cash equivalents will also change. For example:

  • If the stock funds you own have done well, your account may have a higher allocation to stocks—and more exposure to risk—than you originally intended.
  • If your stock funds performed poorly, your account may now have a lower allocation to stocks than you intended—and less potential for growth.

In both cases, it may be time to adjust, or "rebalance," your portfolio to bring it back to your original asset mix. That could mean putting more of your future contributions toward investments that have lagged behind, or shifting some of the money in the investments with an over-allocation to those that need a boost.

4) Take advantage of your employer's match and catch-ups


If your company offers to match a portion of your retirement contributions, try to contribute at least enough to qualify for it. That extra money could really help your balance add up over time.

Also, starting in the year you reach age 50 you are eligible to make catch-up contributions to your 401(k) account (You can review the current annual limits here). So, if your salary increases, you've written that last check for college tuition or you're downsizing your home, you can give your 401(k) account a helpful annual boost over the last decade or so of your working career.

So, don't just "set it and forget it." Take advantage of the features your plan may offer, such as automatic enrollment, contribution increases, access to target date funds and online education and tools, to help you manage your account and stay on track.

Learn more and take action

  • If your 401(k) plan is with Merrill, you can adjust your contribution rate—or sign up for automatic increases if your plan offers that feature—on Benefits OnLine®.
  • Find out why now is the time to revisit your asset allocation strategy.


1 Asset allocation, diversification and rebalancing do not ensure a profit or protect against a loss.

Benefits OnLine is a registered trademark of Bank of America Corporation.