Read 401(k) statement

Chances are your portfolio needs to be rebalanced

March 29, 2009|By Andrew Leckey | Andrew Leckey,Chicago Tribune

One good thing you can say about the effect of the stock market swoon on 401(k) retirement accounts: It has pushed some employees to examine their statements.

Many workers hadn't paid attention since they first signed up, often when they were hired. This neglect meant their 401(k) asset mix and the amount deducted from their paychecks never changed.

Some investors have been making moves: About 6 percent of assets in 401(k) plans were shifted out of stocks and into bonds last year, mostly during tumultuous October and November, according to an analysis by human resources consultant Hewitt Associates.

Since then, little money has been shifted, it found. Contributors aren't heading for the hills either. Less than 6 percent of account owners still on the job stopped contributing.

"People are a little numb and don't know what to do," said Pamela Hess, director of retirement research for Lincolnshire, Ill.-based Hewitt. "Yet with equity allocations at all-time lows, there is no way people who don't rebalance their portfolios can make up lost ground when the markets do rally."

If your target is 50 percent stocks and 50 percent fixed income, you'll probably need to put more money into the stock allocation to get it back to 50 percent, Hess said. If you keep only a small portion of your portfolio in stocks, you limit future upside potential.

Try to review your account assets calmly.

"Don't just look at that first page of your account statement," said Evelyn Zohlen, president of Inspired Financial LLC in Huntington Beach, Calif. "On the second page it shows what you've bought and, since you've bought many shares at lower prices, you'll see you're actually getting value for your contribution dollars."

Those 401(k) contributors who have lost their jobs should avoid rash moves.

"Someone who just got laid off is emotionally stressed and should wait at least two months before thinking about touching their 401(k) money," said David Wray, president of the Chicago-based Profit Sharing/401k Council of America.

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