Approaching 55—Here’s How to Revamp Your 401(k) Now

Core Insights - As retirement approaches, reallocating a 401(k) is essential for balancing growth, income, and risk to ensure savings last through retirement [1][2] - Investors in their 50s are shifting from aggressive saving to strategies that protect their savings while supporting a sustainable withdrawal rate [1][2] Risk Assessment and Financial Needs - At age 55, risk tolerance typically declines, but the need for growth remains to outpace projected inflation of 2.6% annually by 2026 [4] - Evaluating comfort with market volatility is crucial, as well as considering the size of the 401(k), other assets, and expenses [5] - A conservative approach is viable if a 4% withdrawal rate covers living costs, such as $40,000 annually from a $1 million portfolio [5] Investment Strategy - A common guideline for asset allocation for a 55-year-old is 55% in stocks and 45% in bonds, with stocks historically averaging 7% real returns since 1928 and bonds yielding about 4% [3][7] - Target-date funds can automatically adjust allocations to become more conservative as retirement nears [3] - Reallocating a 401(k) should be gradual to avoid locking in losses or missing growth opportunities [7]