How to Hit Your 401(k) Goals by Doing One Simple Thing
When retirement is decades away, it's easy to get in the habit of ignoring your 401(k). After all, you're making your contributions according to your retirement plan, so why not just let the money sit there and do its thing? However, there's one annual task you can complete in just a few minutes and that will boost your 401(k) returns remarkably: rebalancing your investments.
Rebalancing your investments means restoring them to the correct asset allocation balance -- i.e., how you split your money between different types of investments. Having the correct asset allocation is critical for any portfolio, but it's especially important for retirement savings accounts.
When you drew up a retirement savings plan and figured out how much you needed to contribute, those figures assumed a certain average annual return on your investments. Even if your retirement planning consists of "this website says to contribute 15% of my salary, so that's what I'll do," that 15% number recommended to you is based on the ability to earn a decent return. And if you don't get the expected returns, you may end up with a shortage of savings no matter how diligently you contributed to your 401(k). Rebalancing is the key to keeping your average returns high.
Source: Fool.com
