401k Allocation Strategy

In today’s article, we’re discussing our best tips for 401k Allocation and what you can do to be proactive about market volatility.

Peaks and valleys of the market probably give you fits about your investments in retirement savings accounts. Nobody can tell when Wall Street’s ups will peak and its lows bottom out, but you can protect yourself with patience and a cool head.

Included in our signature process, PEAK FORMula, we help clients make informed decisions about investing. I receive several calls asking about “safe” 401(k) investment options for employer-sponsored plans for those who are still working.

Many callers feel uncomfortable about an apparent slide in account values and persistent warnings of a coming major market correction; they want to protect their money. My first recommendation — to do nothing — is usually not what they want to hear.

401k Allocation

Why do I recommend leaving holdings alone as a safe strategy? Simple: asset allocation, which according to research affects 90% or more of your investment performance volatility.

If your portfolio encompasses different asset classes according to your individual comfort level or risk tolerance and your retirement timeline, normal ups and downs of markets constitute no reason to change your investments. Even larger shifts in assets’ value don’t necessarily endanger your returns.

Change in Circumstances

Many of these might indicate that you need to shift your asset allocation, such as aging to within the last five years before your retirement.

The closer you are to retirement, the less time you have for your investments to return to previous, higher values after a down market. Your mix of assets might need updating.

Stable Value

Most employer plans offer a stable value or stable return fund — usually comprising bonds and sometimes wrapped with an insurance product to guarantee a minimum payout.

As their names imply, these investments maintain a fairly constant value for the money invested. The trade-off for this stability is a lack of any appreciable growth on that money. The truly risk-averse investor can consider these funds.

The majority of investors, though, shouldn’t make stable value or return funds a significant portion of an overall account.


A big problem with trying to use stable value funds as safe investments during market fluctuations, timing also becomes an issue when you change your investments based on short-term market conditions.

How long will any current downturn last? When will you feel safe going back to your previous investment strategy? What happens if the markets respond to a correction with a run of new record highs and you remain in your supposedly safe position?

Buying or Selling

Should you spend more time focused on the value of what you already own or on the price for what you are buying?

When corrections cut the value of your retirement account, consider keying in on the other side of the situation: The current price for new shares of your investments are likely lower now. Buy low.

If you set up the right asset allocation, the value of what you already own will return to its previous level as the markets return to theirs. More importantly, the shares you purchase in down markets begin adding value and returns much sooner.

Get Help

Employers often offer one-on-one investment advice to every employee. Nearly every plan offers help with allocation choices, either via a customer service number or a Web-based planning tool.

Being proactive in retirement is one of the many ways to help set yourself up for success now and into the future. You don’t have to figure out the best allocations on your own.

Our team understands the importance of partnering with families to be a financial ally. One who is able to help you put all the pieces of your financial puzzle together from where you’re at right now to beyond and into your legacy.

If you’ve found yourself losing sleep over your approaching retirement, there’s still hope. 

We work with affluent clients who are about five years or less from retirement. We’ve developed and refined an approach that helps our clients put all the pieces of the financial puzzle together to ensure they are prepared. We call it The PEAK FORMula.

We’re happy to talk you through your concerns, answer any questions, and give you peace of mind when it comes to what’s next on your retirement journey. Give our office a call and we’ll get you on the right path today.