Set a target allocation
Choose a long-term investment mix based on your goals, time horizon, financial circumstances, and comfort with risk.
401k Calculator & Guide
Over time, market gains and losses can shift the mix of investments in your 401(k). Rebalancing brings your portfolio back toward a chosen asset allocation, helping you manage risk and keep your investment strategy aligned with your long-term plan.
Rebalancing is the process of adjusting investments so your portfolio returns to a selected asset allocation. Your target allocation might include U.S. stocks, international stocks, bonds, and other investment categories available in your plan.
Choose a long-term investment mix based on your goals, time horizon, financial circumstances, and comfort with risk.
Market movements can cause one category to grow faster than another, leaving your actual allocation different from your target.
If appropriate, adjust holdings or direct future contributions to categories that are below target, subject to plan options and fees.
Suppose an illustrative portfolio starts with 60% stocks and 40% bonds. After a period of stronger stock-market performance, its allocation changes to 70% stocks and 30% bonds. The portfolio now has greater stock exposure than the original target.
| Investment category | Target allocation | Current allocation | Difference |
|---|---|---|---|
| Stocks | 60% | 70% | +10 percentage points |
| Bonds | 40% | 30% | −10 percentage points |
| Total | 100% | 100% | — |
To restore the target, the investor could sell some stock holdings and buy bond holdings, or potentially direct future contributions toward bonds. The appropriate method depends on plan features, available investments, costs, and the investor's goals.
Enter your portfolio balance, current stock allocation, and target stock allocation. The calculator estimates how much would need to shift between stocks and bonds to reach the target in a simplified two-category portfolio.
A positive adjustment means the stock allocation is above the target in this simplified example.
The calculator assumes all non-stock holdings are one combined category, with no fees, taxes, market movements, trading restrictions, or other asset classes. Employer-plan trading rules may differ. In contribution mode, the figure represents the amount of current allocation drift, not the amount of new contributions needed or a time estimate.
Review and rebalance at a set interval, such as annually or semiannually. This can make the process predictable and easier to maintain.
Review the portfolio when an asset category drifts beyond a chosen range from its target. This requires monitoring and a clearly defined threshold.
Direct new contributions toward underweight categories. This may reduce the need to sell existing investments, although it may not fully restore the target allocation.
There is no single schedule that is right for every investor. A consistent method can help reduce reactive decisions, but the appropriate review frequency depends on your circumstances and plan options. Avoid unnecessary changes simply because markets have moved in the short term.
Sign in to your retirement account and identify each investment, its balance, and the asset category it represents.
Review your investment strategy and confirm whether your target remains appropriate for your goals and time horizon.
Calculate each category's current percentage and compare it with the target. Check for overlapping funds that may make exposure less obvious.
Consider available exchange features, future contribution settings, trading restrictions, and any relevant plan costs.
Review the transaction or contribution instructions carefully, then confirm the changes have been processed.
Use a repeatable process rather than constantly reacting to daily market news or short-term investment performance.
Some investors review their allocation once or twice a year; others use a threshold-based approach or rely on an eligible target-date fund to manage allocation changes automatically. These are approaches, not rules that guarantee better results.
| Approach | Potential benefit | What to consider |
|---|---|---|
| Annual review | Simple and predictable | Allocation can drift between reviews. |
| Semiannual review | More frequent check-ins | May encourage unnecessary activity if applied without a clear plan. |
| Drift threshold | Responds when allocation moves outside a defined range | Requires monitoring and a consistent threshold. |
| Target-date fund | The fund manager generally adjusts the fund's asset mix over time | Review the fund's glide path, fees, risk, and other holdings in your account. |
Changing your portfolio whenever markets rise or fall can undermine a long-term plan. Use a consistent method rather than predictions.
Multiple funds can own similar securities. Look through fund descriptions and holdings where available to understand your actual exposure.
Even after rebalancing, future contributions may cause allocation drift if they continue to flow into the same categories.
Rebalancing can maintain an intended allocation, but it cannot guarantee positive returns or protect against all losses.
It means adjusting your investment holdings to bring the portfolio back toward a chosen asset allocation. This may involve exchanging investments or changing future contribution directions.
It depends on your plan and investments. Some plans permit investment exchanges without a direct transaction fee, while other costs or restrictions may apply. Review plan disclosures and fund terms.
Sometimes. Directing future contributions toward categories that are below target can help move your allocation over time. It may not be enough to correct a large difference, and the speed depends on contributions and market performance.
Investment exchanges within a tax-advantaged 401(k) generally do not create current capital gains tax in the way selling investments in a taxable brokerage account can. Distributions from the plan may still be taxable under applicable rules.
A market decline can change your allocation, but it is not by itself a reason to abandon your plan. Compare your actual allocation with your target and follow a consistent strategy that reflects your goals and risk tolerance.
Target-date funds generally maintain and adjust the fund's internal asset mix according to their investment strategy and glide path. You should review the fund's objectives, fees, risk, and whether holding other investments alongside it changes your overall allocation.
Rebalancing is a specific kind of investment adjustment intended to restore a target allocation. Choosing a completely different strategy or changing your target is a separate decision that should be considered deliberately.
There is no universally appropriate allocation. It depends on factors such as your time horizon, financial circumstances, other assets, and tolerance for investment risk. The examples on this page are educational and are not personalized recommendations.
Understand your current investments, choose a consistent review method, and use your plan's tools to keep your portfolio aligned with your long-term goals.
Explore 401(k) investment options →This page is for educational purposes only and does not provide individualized financial, investment, tax, or legal advice. Asset allocation and rebalancing do not guarantee investment returns or prevent losses. Investment choices involve risk, including the possible loss of principal. Review your plan documents and investment disclosures, and consider a qualified financial professional if you need advice tailored to your circumstances.
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