Can I choose different allocations for my current portfolio vs. future contributions?

Some traditional 401(k) providers may allow you to change your investment allocation for future deposits while keeping your current allocation for funds already contributed. At Guideline, we believe in the positive long-term results that a simpler approach may lead to. If you change the way your Guideline Portfolio is allocated, this update will affect the entire portfolio, not just future contributions.

When you complete our portfolio suitability assessment, we recommend one of Guideline’s managed portfolios that we believe is correct for your specific circumstances, taking into consideration your retirement time horizon and risk tolerance. However, this is just a recommendation. You have the option to select any of Guideline’s other managed portfolios, or build a custom portfolio from among the available investment funds in the plan’s menu. If you select one of Guideline’s managed portfolios, that portfolio sets the "target allocation" for the funds in your portfolio. When your investment allocation is implemented, all assets in your retirement portfolio are invested accordingly, unless and until you change your investment allocation.

In a retirement account such as a 401(k), and unlike the situation with taxable, non-retirement accounts, the investment earnings are tax deferred, including any realized gains on the sale of assets in your account. Any pre-tax amounts you contributed, any employer contributions allocated to your account, and all of the investment earnings produced on those amounts are includible in your gross income in the year you receive a distribution. However, any after-tax amounts you contributed to a Roth 401(k) account, plus the investment earnings on those Roth contributions, are never includible in your gross income and you will not be taxed on those amounts when you receive a distribution of these funds. Therefore, for your 401(k) funds, there is no tax advantage to keep your old allocation if you have determined a new allocation is right for you.

 

The information above is provided for educational purposes only and should not be construed as personal investment advice or a guarantee of performance. All investments involve risk and your investments could lose value. You are advised to consult a qualified financial adviser before relying on the information provided herein.



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