Reviewing your 401K ahead of retirement

GOLDEN VALLEY, Minn. - Many of us will have to rely largely on 401Ks for retirement as pension plans continue to dwindle.

Making sure you have enough to live on requires some work, including reviewing and re-balancing your portfolio to make sure it's on target.

Financial advisor Dan Ament, with Morgan Stanley in Wayzata, joined KARE 11 Sunrise with some tips on doing just that.

Are you maxing your match? Sadly, one often overlooked benefit in a 401(k) is the matching contribution from your employer. More specifically, NOT contributing enough to get the free money your employer is offering you. Review your contribution % and ideally contribution at least the amount required to maximize your employer's matching contribution if offered.

There is still time for 2013! If your employer allows it, consider changing your payroll deferral amount for the remainder of 2013. You would be saving more for retirement and saving taxes too! If you hadn't maxed your match as discussed above, this may get you there!

Why Rebalance? Many participants reportedly fail to review the selections in their plan or reallocate the portfolio, which may lead to long-term holdings that are inconsistent with their current risk tolerance and time horizon. Consider this example. You rebalanced your portfolio with 70% allocated to global stocks and 30% to a variety of bond funds. Over time if the stocks on average appreciated 25% and the bonds returned 0%, you would now have 75% of your portfolio in stocks and 25% in bonds. In addition, specific investments you hold most like had great variance in return (if you were diversified) making it important that you bring your broad mix back in alignment typically once per year.

Stable value funds in 401(k)s – You have likely hear much talk about interest rates and the potential negative impact on certain bond investments. Stable-value accounts are available in half of all defined-contribution retirement plans, according to the industry's Stable Value Investment Association. For those concerned about the risk of rising interest rates nad the related potential impact to bond holdings, a stable value fund option in a 401(k) may be the safe haven you desire.


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