Retirement Basics
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Protect yourself with asset allocation

You've enrolled in your workplace 401(k) plan. Maybe you even contribute to an IRA or put money away in other retirement savings accounts.

That's all well and good, but if you've got a hands-off style to retirement planning -- maybe you simply check account balances on occasion -- you could be doing yourself harm. Paying attention to asset allocation will help ensure that you're on track to meet your retirement goals.

A financial adjustment

Asset allocation may sound overwhelming, but think of it as a financial checkup. You're really assessing how well various investments have fared to ensure you've got enough invested in each asset class -- say, large-cap stocks or bond funds and the like -- so your investments are in line with your risk tolerance and poised to produce the type of earnings you've planned on.

While most individuals have heard about the importance of asset allocation, few actually follow through. One recent study by Fidelity Research Institute found that just 25 percent of individuals have reallocated their investment portfolios in the last six months to improve their retirement readiness. And 20 percent have sought guidance from a financial pro in that time period.

How often should you check your asset allocation?

At least once a year or if you change jobs, have a child, get a divorce or experience some other major life change that will impact your finances, says John Markese, president of American Association of Individual Investors.

"I encourage people to look at everything annually. Then you can reconfigure your investments if it's necessary."


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