Why Set It and Forget It Isn’t Enough for Your 401(k)
When starting a new job, one of the first financial decisions you may encounter as part of the onboarding process is enrolling in your employer’s 401(k) plan. Depending on the plan, you may be automatically enrolled at a predetermined contribution rate unless you opt out, or you may need to actively enroll. Once enrolled, you typically receive access to an online account through the plan’s provider, such as Fidelity, Empower, or Transamerica, where you can view your savings, manage your contributions, and review your investment selections.
However, after this initial setup, many individuals don’t revisit their accounts to see whether their contributions are enough to support their retirement goals. Factors like age, market fluctuations, salary increases, and life changes can reshape how much you can and may need to, save for retirement. As a result, some individuals can fall behind on their savings without realizing it.
Below, we look at some of the reasons why it’s important to stay proactive about reviewing your 401(k) account.
- Your Savings Rate Can Fall Behind
As you progress in your career and your income grows, you may have opportunities to increase the amount you contribute toward retirement. When you are 22 and just starting out in your career, you are likely contributing a smaller amount as you begin building your savings. But as you move through your career, you may have opportunities to increase that contribution, whether through small increments over time or larger increases as your income grows.
The general idea is that as you get closer to retirement, you should be intentional about increasing your contributions and making sure your savings are keeping pace with your goals. T. Rowe Price provides the following savings benchmarks as a general guideline1:
These benchmarks are guidelines rather than universal targets. How much an individual may need depends on factors including income, spending, retirement age, lifestyle expectations and other sources of retirement income.
Higher-income workers may have additional reasons to revisit how much they are saving. As income grows, maintaining a similar lifestyle in retirement may require accumulating more personal savings, particularly since Social Security benefits are not designed to replace the same percentage of earnings at every income level. Periodically reviewing and increasing your 401(k) contributions, when appropriate, can help keep your savings aligned with your income and long-term retirement goals.
- Your Investment Mix Can Drift
Portfolio drift is a natural occurrence that can happen in any portfolio. As the stock market moves and different investments perform differently, your portfolio can begin to shift away from its original target.
For your retirement plan, that shift can matter. If your portfolio drifts toward a higher percentage of stocks, for example, you may be taking on more market risk than you originally intended. If the market declines, that additional exposure could result in greater losses, which can be especially concerning for someone who is nearing retirement and has less time to recover from a downturn.
On the other hand, your portfolio could also drift in the opposite direction and become more conservative than intended, potentially limiting the growth you need to support a retirement that could last several decades.
Periodically reviewing and rebalancing your portfolio can help keep your investment mix aligned with your retirement timeline, goals, and comfort with risk. A financial advisor can also help you evaluate whether your current investment mix still makes sense for where you are today and where you are headed.
- Your Risk Needs Can Change
Your comfort with investment risk can change over time, and so can your ability to take on that risk. When you are decades away from retirement, you generally have more time to recover from periods of market volatility. As you move closer to retirement, that time horizon shortens, and a significant market downturn could have a greater impact on the savings you expect to rely on in the near future.
Your personal circumstances can also affect how much risk is appropriate for you. Changes in your income, financial obligations, retirement timeline or other assets may influence how comfortable you are with market fluctuations and how much investment risk you can reasonably take. This is why the investment approach you selected when you first enrolled in your 401(k) may not necessarily reflect your needs years later.
Periodically reviewing your risk tolerance, time horizon, and overall financial circumstances can help you determine whether your 401(k) investment strategy still aligns with where you are on your path toward retirement.
- Your Other Investments Can Change the Picture
As you progress in your career and accumulate more assets, your current 401(k) may become just one of several retirement accounts you own. In addition to your current plan, you may have an IRA or a 401(k) from a previous employer. While these accounts exist separately, they can all contribute toward the same goal of funding your retirement.
This becomes especially important after changing jobs, as you may accumulate multiple 401(k)s over the course of your career. In some cases, you may choose to roll assets from an old 401(k) into an IRA. A direct rollover from a traditional 401(k) to a traditional IRA can generally allow you to move those retirement savings without triggering current income taxes on the transferred amount, allowing the assets to remain tax deferred.
Even if each account appears appropriately diversified on its own, similar holdings across accounts could leave your overall retirement portfolio with more exposure to certain investments than you intended. Reviewing your retirement accounts together can give you a clearer picture of your overall portfolio and help you determine whether your asset allocation is still aligned with your retirement strategy.
- Life Changes Can Change the Plan
Life can be unpredictable, and certain events can greatly reshape your ability to save, along with your risk tolerance. Major life events and career disruptions, such as marriage, divorce, a major diagnosis, job loss, a career change, or an inheritance, can all influence your retirement path.
Some events will have a greater financial impact than others, causing you to rethink your priorities and where your money goes. You may need to contribute less to your retirement plan for a period of time to cover new or unexpected expenses, which can ultimately affect your progress toward your long-term goals.
Making financial sacrifices so you can focus on resetting after a serious life change is sometimes necessary. But as circumstances stabilize, it is important to revisit your retirement plan, so a temporary adjustment doesn’t become a long-term setback.
- Important Account Details Can Become Outdated
Throughout the years, your personal information will likely change. Marriage or divorce may result in a legal name or marital status change, a move will require you to update your address, or a beneficiary may be born or pass away—the latter being one of the most overlooked but important, life updates.
These changes may need to be reflected in your retirement plan. One of the biggest reasons to keep this information current is to make sure your account is accurately set up for tax reporting and that your beneficiary designations reflect your wishes in the event of your death.
Fortunately, making these updates typically isn’t difficult. You can often update your personal details directly through your plan provider’s online portal. Reviewing this information periodically and making updates when life changes occur can help keep your account information current.
Retirement planning is an ongoing process that can span decades. As a result, your progress toward retirement requires periodic attention to help you determine whether you are still on track to retire when you want. It’s easy to let life get in the way and become less proactive about reviewing your retirement plan. However, overlooking your plan for even a few years could mean missing opportunities to adjust your savings or investment strategy as your circumstances change. The goal isn’t to constantly adjust your 401(k), but to periodically make sure the decisions you made years ago still make sense today.
A financial advisor can help keep you accountable when it comes to reviewing your 401(k), while also looking at your retirement strategy as a whole to determine whether you are taking the appropriate steps toward your goals. Your financial circumstances in your 20s and 30s likely won’t be the same in your 40s and beyond, so your retirement plan should have the flexibility to evolve with you. If you’re interested in exploring whether your plan is still aligned with where you are today and where you want to be in the future, please don’t hesitate to reach out to us.
[1] Source: T. Rowe Price, “You’re Age 35, 50, or 60: How Much Should You Have Saved for Retirement by Now?” April 20, 2026.
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