Can You Change Your 401k Investments?

A 401(k) plan serves as a foundational retirement savings vehicle for many individuals, offering tax advantages that support long-term financial growth. Participants contribute a portion of their earnings to these plans, often with employer contributions, to build a nest egg for their future. As financial circumstances and market conditions evolve, a common question arises regarding the ability to adjust the underlying investments within these accounts. Generally, changing your investments within a 401(k) is a typical and permissible action, allowing for strategic adaptation of your retirement portfolio.

Understanding Investment Choices

A 401(k) plan typically provides a selection of investment options. These options generally fall into broad categories such as equity funds, bond funds, and target-date funds. Equity funds invest in company stocks, offering potential for growth but with higher volatility, while bond funds focus on debt instruments, providing more stability and income. Target-date funds are designed to simplify investing by automatically adjusting their asset allocation, becoming more conservative as the target retirement date approaches.

Each 401(k) plan establishes its own specific menu of available investments. To understand these choices, including objectives, risk profiles, and historical performance, participants should consult their plan’s Summary Plan Description (SPD). The SPD is a comprehensive document provided by the plan administrator that outlines the rules and features of the 401(k) plan in detail, including information on eligible investments. Reviewing this document helps individuals make informed decisions about which funds align with their personal financial goals and risk tolerance.

Accessing and Navigating Your Account

To change your 401(k) investments, access your account, typically through the plan provider’s website or mobile application. Most 401(k) plans offer online access to account information and the functionality to make adjustments. If you have not previously accessed your account online or have forgotten your login credentials, you can often find the necessary website information and customer service contact details on an old 401(k) statement. Alternatively, contacting your employer’s human resources department can provide guidance on how to gain access.

Once logged in, you will generally navigate to a section dedicated to investments or portfolio management. This area typically displays your current investment allocation, showing the percentage of your funds held in each chosen investment. You should look for options such as “Change Investments,” “Manage Portfolio,” or “Rebalance” to proceed with modifying your allocation. The interface usually presents a clear overview of your existing holdings and the options available for adjustment.

Executing Investment Changes

After navigating to the investment management section, select your desired new funds and specify allocation percentages. You will see a list of available funds, allowing you to choose where current balances and future contributions will be invested. For example, you might decide to shift a portion of your existing balance from an equity fund to a bond fund, or to direct new contributions into a different target-date fund.

Most platforms require you to input the desired percentage for each selected fund, ensuring the total allocation equals 100%. Before finalizing the transaction, you will usually be prompted to review a summary of your proposed changes. This review step is important for confirming that your selections and percentages are accurate. Upon confirmation, the transaction is submitted for processing, which typically occurs at the end of the trading day. While the purchase of new funds usually takes place the next business day, some changes, especially to future contributions, may take one to two pay cycles to reflect fully.

Important Considerations for Changes

Before and after making investment changes, Rebalancing your portfolio realigns your asset weights to target percentages. This is necessary as investments perform differently, causing allocation drift. Many financial professionals recommend rebalancing at least annually, or up to four times a year, to maintain your desired risk profile.

Investment changes typically process at the closing price of the trading day submitted. Submissions made after market close, on weekends, or holidays will generally process on the next business day. Be aware of potential fees. While direct fees for changing allocations are uncommon, individual funds carry expense ratios—annual fees as a percentage of assets. These can range from under 0.50% for passively managed funds to higher for actively managed ones, and even small differences can significantly impact long-term returns.

Some plans impose frequency limits, though most allow more frequent adjustments than the quarterly regulatory minimum. Excessive trading is discouraged, and some plans might impose fees after many reallocations. It is advisable not to change allocations more than once a month. Maintaining diversification across asset classes mitigates risk by preventing a single investment’s poor performance from disproportionately affecting the portfolio.