Mix it up—and rebalance

Allocating your investments across a range of asset classes is a time-tested strategy to help manage investment risk. That’s what you most likely did when you set up your retirement account.  

However, investment values are never static. Over time, investments that have done better than others could grow to represent a larger portion of your account than you originally intended, changing your portfolio’s risk level.

Review your asset allocation

If, for example, the portion of stock investments in your account grows, your exposure to risk will also grow since stocks are riskier than the other major asset classes (bonds and cash). Alternatively, if the portion of your portfolio invested in stocks declines, your asset allocation becomes more conservative than you planned. Your exposure to risk is lower, but your potential for future gains may also be lower.

Get back in balance

You can restore your original asset allocation and return your investments to a more comfortable level of risk by rebalancing. There are two ways to rebalance: Either sell some investments in the overweighted asset class and buy investments in the underweighted asset classes or change the way your new contributions are invested until your desired asset allocation is restored.

Small steps

Every journey begins with that first, small step. You took that first step to retirement wellness when you joined your employer-provided retirement plan. But are there other things you can do that will help get you to your destination? There are.

One of the most effective steps you can take is to regularly increase the percentage of your salary that you contribute to your retirement plan. Even modest regular contribution increases can have a potentially significant impact on your plan balance.

Given your everyday expenses, finding extra cash to add to your retirement plan account may seem to be a challenge. However, it can be done. Consider using some of these strategies.

Check your spending

Change your spending habits and you can free up extra money to invest for your retirement. For example, cut back on frequent takeout meals and movie or music downloads. Look into how you can get cheaper phone and Internet services or auto insurance rates.

After you pay down debt ...

Not every expense lasts forever. If you have teenagers, you’ll find that you can add more to your retirement savings once your children start paying for their own auto insurance or graduate from college. Likewise, student loans and car loans have expiration dates. When you pay off a debt, take part of the money you were paying on your loan and redirect it to your retirement plan.

Contribute part of bonuses and raises

If you receive a bonus or a regular pay boost, consider using some of that money to add to your retirement savings. Over time, you may see an appreciable difference in your total retirement savings.

Small amounts can make a big difference


You could have this much more saved after

If you increase plan contributions by

5 years

10 years

20 years

40 years