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Two easy ways to get the most from your 401(k) plan


Studies show that how much you put in stock, bond, and cash funds is one of the biggest indicators on how much you will save for retirement in your 401(k). This is called your asset allocation.

The first easy thing to do is align your 401(k) account’s asset allocation with your goals. Each person’s time horizon to use these monies and risk tolerance is different, so each person’s “ideal” allocation will vary. A good rule of thumb to start is to use your age for how much to put in bond and cash funds. As an example, if you are 45, ensure 45% of your 401(k) account is in bond funds and 55% in stock funds. If you are unsure of which funds to select, selecting a model portfolio that best fits your situation or reading our Savings Guides can help you determine what’s right for you.

The second way to get more out of your 401(k) is to take advantage of auto-rebalancing. This feature automatically adjusts your asset allocation to the percentage you choose either every quarter or year depending on your provider’s options. Many people’s asset allocation gets out of whack as they may not regularly review their account to make needed adjustments. This can expose your savings to greater market risks than you want. Overexposure can feel okay in up markets, but can be down right bad in down markets. Auto-rebalancing can be a great way to keep your savings in line with your goals.

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