401(k) money moves to make now as the stock market rallies - CNBC

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The recent stock market rally may have boosted your 401(k) balance, but it probably won't be the silver bullet that secures your financial future.

Take a look now at all of your money goals, not just your retirement savings and investments, financial advisors say.

Key market averages — the Dow Jones Industrial Average and S&P 500 — posted all-time intraday highs on Monday, causing many some investors to pay closer attention to their nest eggs.

When there are big swings in the markets, or uncertainty about the economy or political landscape, that's when many average investors wake up and start to make changes to their portfolio. Financial advisors say that's not the time to make a big move in your retirement savings plan.

"Never base your investments on how the market is doing," said certified financial planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida, and a member of the CNBC Financial Advisor Council. "Have your investment policy structured around how much risk you can take financially and psychologically."

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The day before Election Day, participants in 401(k) plans moved money around in those accounts more than twice as much as they normally do on an average trading day — with funds largely flowing from equities into fixed income, according to data from Alight Solutions. If they kept it there, those investors missed a 7% gain in the S&P 500 in the past week. Don't try time the markets, financial advisors say. Instead, do this with your 401(k) now: 

Review your allocation

Stick with a simple, diversified, and balanced portfolio. "The market has been down so much and up so much, there may be a welcome imbalance in your portfolio," said Charleston, South Carolina-based CFP Tim Maurer, director of advisor development at Buckingham Strategic Wealth. "Take from parts of your plan that have done well and give to parts of plan that have done less well."

Increase your contribution

If you dialed it back, take full advantage of your company's matching contribution — and add more money each pay period if you can. Your automated 401k savings plan may also have an "auto-escalation" feature — where you commit to increasing the percentage of your pay that goes into your 401(k) every year. Check that box.

Automate your savings

"Every household — every individual, small or large family — should have automatic savings that goes toward nothing in particular", said Maurer, who is also a member of the CNBC Financial Advisor Council. "It's saving for sake of sanity." Some people may call it an "emergency fund" or "rainy day fund," but this isn't only money that you stash away for a worse-case scenario. It's money that you put away to have a financial cushion to put your mind at ease.

Rein in your spending

As you put money away, also review how you've been spending. You should be living within whatever means are available to you — no more. That's an important discipline to maintain now and into your retirement. "The biggest determinant of success in retirement is how much you spend, not how you invest your money," McClanahan said.

Renegotiate rates on debt

When it comes to top financial priorities, paying down debt ranks higher than saving or spending for some people. David Blanchett, the head of retirement research at Morningstar, agrees that this is a prime time to focus on your liabilities.

"Right now, interest rates are near all-time lows, so anyone that has any kind of loan — mortgage, student loan, credit card balance — needs to be sure they've got the best absolute rate possible," he said. "While it's true rates might remain low for a while, go ahead and at least explore your options."

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401(k) money moves to make now as the stock market rallies - CNBC
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