Fee minimization and portfolio rebalancing are two key requirements for keeping a 401(k) on track for retirement. As such, individuals should review their 401(k) plans at least once each year to ensure that they meet current investment needs and that the expenses baked into the plan are reasonable and affordable. Read on as we cover how to review and adjust your 401(k) to make sure your retirement train hasn't jumped the tracks.

Review Quarterly Statements and Literature
Rather than tucking account statements into an old envelope until tax time or just throwing them away, as some people do, investors should read all statements as soon as they receive them. In fact, they should study them in detail for any errors. For example, investors should look to see whether the check they recently sent in was deposited into the account and that the funds and investments selected are the ones that were purchased.

In addition, investors should peruse their quarterly statements to see if the expenses that they are being charged, or per-trade charges, are comparable to the previous year. If these charges have increased - and, let's face it, they seldom go down - the investor should assess whether they are still affordable and reasonable. Investors should also compare these charges against those of similar funds to make sure that they are consistent with what is being charged throughout the industry. (For more insight, read Don't Let Brokerage Fees Undermine Your Returns and Are mutual fund performance numbers reported net of fees (operating expenses and 12b-1)?)

Investors should also look for changes in the expense ratio from year to year. Such charges will be explained in the literature that the administrator sends out. The investor should then compare this to expense ratios being charged by other funds within the plan. If another fund has lower expenses and is expected to perform well going forward, perhaps it makes sense to switch. (See Picking The Right Mutual Fund.)

Is a Broker Handling the Account?
If a broker handles your retirement account, that person is probably charging additional fees for his or her services. If you are unsure of whether a broker is charging a fee, simply ask your human resources representative, or review previous quarterly statements for itemized charges. Broker charges can easily add an extra 1-2% per year in fees. If a broker is making money off the account and you don't think that the broker's services justify his or her earning a commission, see if you can purchase the funds directly from the source. If the broker charges a management fee, check with your employer to determine whether it provides that service free of charge, as many large corporations do. You can also seek advice from your human resources representative. There may be a way to get around some of these broker fees, but you need to ask.

Check Out the Fund's Performance
How often do investors actually sit down and compare their fund's performance with other stock market benchmarks? Odds are they rarely do, and this is a mistake. If a particular fund has been consistently lagging behind major benchmarks such as the S&P 500, the Dow or the Russell 2000 for several years, the investor should consider selling it off and heading for greener pastures. (For more on this Benchmark Your Return With Indexes.)

Investors should also be cautious and should not automatically jump on a fund with unusually high returns over the last year or even the last several years. This is because the holdings in that fund may have peaked or run their course. Instead, investors should make their decision based on where they believe the market is heading, the fund's holdings, the expenses being charged, the fund's objectives and well as their own individual needs, risk tolerance and other preferences. (Find out what your risk tolerance is in Personalizing Risk Tolerance and Determining Risk And The Risk Pyramid.)

For additional details on your fund's holdings, check out your quarterly literature, call the fund directly, or review the fund's website. Along with performance numbers, the website will usually identify fairly up-to-date holdings as well as provide some commentary about what it sees as the risks and the opportunities going forward.

Any New Charges/Fine Print
Investors should also be reviewing quarterly and year-end literature to see if any new charges have been, or are about to be, instated. For example, it's possible that a particular fund may suddenly charge a 2% redemption fee if the investor liquidates his or her holdings within a 90-day period after purchase. Other charges may be instituted as well. These are then subtracted from the fund's net asset value (NAV). An investor's yearly review of his or her 401(k) is an excellent way to uncover any such new charges.

If new charges are found, perhaps it's time to change over to a fund that isn't actively managed or one that tracks a major index such as the S&P 500. Expenses for these funds are often much cheaper than for funds whose managers more actively trade their holdings.

Have Your Needs Changed?
Give some thought as to when you want to retire and how much you'll need. Also give some thought to your risk tolerance. Has anything changed from last year? If so, make sure that your holdings are consistent with your up-to-date objectives and needs. (For tips, read Rebalance Your Portfolio To Stay On Track.)

Staying on top of your 401(k) and any changes that may occur can help you get the most for your invested money and avoid unnecessary charges. Over time, small adjustments can have a significant impact on your returns.

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