Your 401(k) is one of the most important tools you have for building long-term wealth. But simply contributing money every paycheck isn't necessarily enough.

Over time, your investments can drift away from the strategy you originally chose. A portfolio that started with a balanced mix of stocks and bonds can eventually become much more heavily invested in stocks after a strong market run.

That's where rebalancing comes in.

Rebalancing means adjusting your investments to bring your portfolio back toward your intended allocation.

Here are five signs it may be time to take another look at your 401(k).

1. Your Portfolio Doesn't Look Like the One You Originally Chose

Maybe you originally decided to invest 70% in stocks and 30% in bonds.

Years later, strong stock-market performance could have pushed that allocation significantly higher.

That's not necessarily bad—but it means your portfolio may now carry more risk than you originally intended.

The lesson: Don't assume your portfolio is still diversified simply because you haven't changed anything.

Sometimes, doing nothing is what causes your allocation to change.

2. One Investment Has Become Too Large

Many 401(k) plans offer a range of mutual funds, index funds, and target-date funds.

If one investment has grown substantially faster than the others, it can eventually dominate your portfolio.

For example, imagine you have several investments but one stock fund now represents a much larger percentage of your retirement savings than you originally intended.

A market decline in that particular area could have an outsized impact on your retirement account.

Rebalancing can help prevent one investment or asset class from becoming too influential.

3. Your Risk Tolerance Has Changed

Your investment strategy shouldn't necessarily remain the same throughout your entire career.

Someone in their 20s may have decades before retirement and potentially more time to recover from market downturns.

Someone approaching retirement may have less time to recover from a major decline.

That doesn't mean younger investors should automatically take aggressive risks or older investors should eliminate stocks. Instead, your allocation should reflect your time horizon, financial situation, and ability to tolerate market volatility.

A major life change can be a good reason to review your strategy.

4. You Haven't Looked at Your 401(k) in Years

Ignoring your 401(k) completely isn't a strategy.

While you shouldn't obsess over your retirement account every day, reviewing it periodically can help ensure that:

• Your investments still match your goals
• Your contribution rate is appropriate
• Your portfolio remains diversified
• Your beneficiaries are up to date
• You're taking advantage of any employer match
• Your investment fees are reasonable

A yearly review can be a simple way to stay organized without turning retirement investing into a full-time job.

5. You're Getting Close to Retirement

The closer you get to retirement, the more important your overall risk management becomes.

A major market decline shortly before retirement can be particularly damaging because you may have less time to recover.

That doesn't mean you should completely abandon stocks.

Instead, it may be worth reviewing whether your current allocation makes sense for your expected retirement date and spending needs.

Some investors gradually adjust their stock and bond allocations as retirement approaches, while others use a target-date fund to handle those changes automatically.

How Often Should You Rebalance?

There's no single perfect schedule.

Some investors rebalance once a year. Others rebalance when their portfolio's allocation moves a certain percentage away from their target.

The important thing is having a consistent strategy rather than making emotional decisions based on what the stock market did last week.

And remember: rebalancing doesn't mean trying to predict which investment will perform best next.

It's about maintaining the level of risk you've decided is appropriate for you.

Don't Forget Your Contributions

One of the easiest ways to keep your portfolio balanced is to use new contributions strategically.

Instead of immediately selling investments that have grown, you may be able to direct new 401(k) contributions toward areas that have become underweighted.

This can help bring your portfolio closer to its target allocation without necessarily requiring you to sell investments.

Your particular 401(k) plan will determine what options are available.

The Bottom Line

A 401(k) can be an incredibly powerful wealth-building tool—but it's not completely "set it and forget it."

Markets move. Investments grow at different rates. Your financial circumstances change. And your retirement date gets closer every year.

If your portfolio no longer matches your intended risk level, one investment has become too dominant, or you haven't reviewed your account in years, it may be time to rebalance.

The goal isn't to beat the market every year.

The goal is to build a retirement portfolio that you can stick with through both good markets and bad ones.

Your future self may thank you for taking the time to check it today.

The Daily Cent Takeaway

Contribute consistently. Diversify thoughtfully. Rebalance periodically. And don't let short-term market movements dictate your long-term retirement strategy.

Disclaimer: This article is for informational and educational purposes only and should not be considered personalized financial, investment, tax, or retirement advice. Investment decisions should be based on your individual circumstances and goals. Consider consulting a qualified financial professional before making significant changes to your retirement portfolio.