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Don't leave your 401(k) account on autopilot. Like all investments, you should review your plan at least once a year. If you haven't done so in a while, use the arrival of your statement to trigger an evaluation. Be sure to take the following four steps:
Evaluate your investments compared to all investment alternatives offered by the plan. Your investments should be appropriate for your goals. As you age, you might want to shift some of your investments. Or, depending on market activity, you may want a more diversified portfolio. Selling investments within your 401(k) plan typically doesn't generate tax liabilities, so you can make these kinds of changes without worrying about the tax effects.
Make sure no single company's stock makes up more than 10 percent to 20 percent of your 401(k) balance. Especially as you near retirement and don't have as much time to recover from market fluctuations, you don't want too much of your balance allocated to one inv estment. This is especially important if that investment is stock in the company you work for.
Review how much you are contributing to the plan. Over time, you should strive to increase the percentage of your income that is set aside for retirement. One way is to immediately allocate any salary increases to your 401(k) plan. At a minimum, make sure to contribute enough to take full advantage of any employer matching contributions.
Check your statement for errors. Always look to see that all payroll deductions and employer matching contributions went to your account and that the proper investments were purchased with those funds. If you have a loan, verify that the balance is accurate and that loan repayments have been properly applied.
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