How Often Can You Change Your Investments in a 401(k)?

If you're not familiar with your investment choices, consult a financial adviser.

If you're not familiar with your investment choices, consult a financial adviser.

The average 401(k) plan, according to the Financial Industry Regulatory Authority, offers at least eight to 12 investment options. Your alternatives may come in the form of mutual funds, company stock, guaranteed investment funds, annuities or stable value accounts. You might find that sometimes your investments perform satisfactorily and sometimes they don’t. In the latter case, you may need to change them. How often you can shift your investments depends on your company’s policy.

General Rule

If your employer goes by the U.S. Department of Labor’s guidelines, it must allow you to change your investments at least quarterly. If your employer offers high-risk, unpredictable investment options, such as employer stock that changes significantly over a brief period of time, you must be allowed to change your investments more often than quarterly. Otherwise, it’s up to your employer to decide how frequently you can make investment changes.

Plan Document

Your employer must provide a written explanation of how its 401(k) program is operated. It must also give you an updated copy of the summary plan description, which should explain how often you can change your investments. If you don’t have the summary plan description, ask your human resources department or benefits administrator for the frequency.

Account Valuation

How often you can change your allocations may depend on how frequently your employer values 401(k) accounts. During the valuation period, the 401(k) record-keeper assesses your account balance, including its growth and losses. Some companies do daily valuations, while others perform them less frequently, such as monthly, quarterly or annually. If your account is valued daily or monthly, you can change your allocations only once a day or once a month.

Changing Your Investments

When changing your investment options, think carefully about your retirement income goals, risk tolerance and investment fees. Being far from retirement age typically gives you more time to reinvest your earnings when your investment worth increases and to recuperate from losses when the value drops. The nearer you get to retirement, the more you might consider changing your investments to those likely to stabilize your funds and retirement income. If you can accept that your savings will fluctuate with the market, you might invest in stocks. This type of investment comes with higher risk, but also has the potential for higher return. To keep up with fluctuations in the market, check your portfolio regularly and re-balance your assets accordingly. If you prefer not to take that risk, you might consider investments that typically offer a regular return, such as stable value funds.

Procedure

To change your 401(k) investments, follow your company’s procedures. You can probably make the change online via your service provider’s website. By law, your plan’s fiduciary, which is the person or company managing or controlling the plan, must offer participants a diversified range of investment options to reduce the risk of significant losses.

 

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