How Often Should You Review Your 401(k) To Maximize Returns?

Many people believe in having a “set it and forget it” approach to their 401(k)s, but market fluctuations and life events can quickly disrupt your portfolio. While you don’t need to check your 401(k) balance like many check social media, periodic reviews can help ensure you’re maximizing gains on your way to retirement.

Below, we take you through how often you need to review your 401(k).

Why “Set It and Forget It” Can Hurt Your Returns

There are certainly downsides to checking your 401(k) too frequently—stressing over every up and down of the market—but it’s also the case that markets don’t run on annual cycles, and neither should your retirement strategy.

There’s no precise approach that works for everyone since each of us has a different investing personality. “It’s all about figuring out what works for you—as an individual with unique preferences, risk tolerance, and emotional reactions,” Yvan Byeajee, author of Trading Composure: Mastering Your Mind for Trading Success, told Investopedia. “Some people are more comfortable with steady, long-term plays…while others prefer active, short-term trading.”

Most 401(k) investors need more than annual check-ins. Market volatility and changes in employer benefits might require rebalancing. Financial experts often recommend a tiered approach:

• Monthly contribution checks: Review your contribution rate monthly during the first year after any salary change, promotion, or bonus.
• Quarterly deep dives: Every three months, examine your asset allocation against your target percentages. Market moves can skew your carefully planned portfolio balance. If your stock allocation has grown from 70% to 85% because of market gains, you’re taking on more risk than intended.
• Annual reviews: Use these for a big-picture analysis—evaluate investment options, update beneficiaries, compare fees, and check plan contributions.

When Life Changes Demand Attention

Certain life events like marriage, divorce, the birth of children, job changes, and inheritance all create reasons to reassess your 401(k).

For example, when you get a new job, you’re not just choosing between rolling over your old 401(k) or leaving it behind—you’re evaluating two different investment universes. Compare expense ratios, investment options, and employer matching formulas. Sometimes, the old plan offers better investment choices; at other times, the new plan provides superior benefits.

Getting married could mean coordinating your retirement. Divorce requires updating beneficiaries and reassessing risk tolerance. The birth of a child often means reducing your risk exposure while increasing life insurance. With new expenses for the baby, many parents are tempted to slash their 401(k) contributions, but that could mean missing out on the compound growth until contributions go back up again. 

Many employers periodically update their 401(k) offerings, adding lower-cost index funds or improving matching formulas. Similarly, changes in your income or tax situation might make Roth 401(k) contributions more worthwhile than traditional pre-tax contributions.

Market Timing vs. Strategic Positioning

While attempting to time the market with your 401(k) generally backfires, strategic positioning based on market conditions can improve returns. During particularly volatile periods, more frequent reviews can help keep your portfolio in line with your risk tolerance. That said, it’s important to remember that 401(k)s are meant for long-term buy-and-hold strategies.

“Buy and hold until you reach your financial goals rather than trying to time the market,” advises Christina Lynn, a behavioral finance researcher and certified financial planner at Mariner Wealth Advisors.

The Bottom Line

The best schedule for reviewing your 401(k) isn’t set in stone since it needs to be adaptive. Quarterly reviews during the years you’re accumulating funds, plus trigger-based reviews for life changes, can help you maximize your retirement wealth while protecting against unnecessary risks.