401(k) Tips

How often can I change my 401k contribution?

If your financial circumstances have changed, you may consider changing your 401(k) contribution. Find out how often you can change your 401(k) contributions.

3 min read

As circumstances change, whether you are getting a raise or experiencing a cash crunch, you may consider making changes to your 401(k) contributions. While you may want to increase or decrease your contributions at any time during the year, there are certain rules you should know.

Your employer decides how often you can change your 401(k) contributions- some employers may let employees change their 401(k) contributions once a year, or as often as employees may want to adjust their 401(k) contributions. The Department of Labor requires employers to allow their employees to change investments at least quarterly.

Can you change 401(k) contributions at any time?

Most employers allow employees to change their 401(k) contributions at any time. However, some employers only let their employees change the amount of 401(k) contributions once a year.

Changing the contribution amount is a straightforward process, and you should contact your plan provider to obtain the correct procedure. If allowed, you may be able to change your contribution online on the plan sponsor’s website.

According to the Department of Labor guidelines, employers are required to allow plan participants to change their investment allocation at least quarterly. This period can change to “more often” where the plan offers volatile investment options like stocks to plan participants.

If you don’t know how often your plan lets employees change contributions, you should contact the plan provider to get the correct information. If you don’t know who your plan provider is, you should ask the company’s human resource department to point you in the right direction. You can then call or email the plan provider to know when you can change your 401(k) contributions.

How to change 401(k) contributions (steps)

If you are plan to increase or decrease your 401(k) contributions, you should find out with your employer to know when you can initiate the change. The process of changing 401(k) contributions should be as follows:

Contact provider

The first step is to contact the 401(k) plan provider to know when and how you can change the contributions for your plan. If you don’t know the plan provider’s contact, you should contact the human resource department to get the provider’s contact information.

Decide how much to contribute

If you recently got a pay rise, you should decide the new contribution amount that you will make to the account. You should consider the company’s 401(k) match so that you can increase your contributions to collect the full match. However, if your financial position has changed and you want to lower your 401(k) contribution, you should decide on the new contribution amount.

Fill in form

Once you have decided on the new contribution amount, you should fill the paperwork provided by the plan provider. You may also be allowed to fill an online form on the plan provider’s website to confirm the new changes.

Change validation

Once the plan provider validates the 401(k) contribution changes, it will enter the new changes in its system. In the next payment period, the employer will deduct the new contribution directly from your paycheck.

Common reasons for changing 401(k) contributions

There are different reasons why plan participants may want to change their 401(k) contribution amounts. Common reasons for changing contributions include:

Save more

If your financial position has changed, you may consider changing your 401(k) contributions. If you received a pay raise or freed up money after paying off a loan, you can change your current contribution to a higher value to increase your savings.

For example, if you earn $90,000 and you contribute 10% i.e. $9000, and you recently got a raise to $100,000, you can change the contribution to 10% of the new income i.e. $10,000.

Lower 401(k) contributions

If you have taken up a loan and your monthly commitments have increased, you can change your 401(k) contribution to free up more cash. You can adjust the contribution percentage or adjust the 401(k) contribution to a lower level.

Get full match

If are not getting the full 401(k) match, it means you are leaving free money on the table. You can increase your contributions to get the full 401(k) match.

Change asset allocation

If your financial strategy has changed, or you want to be more aggressive or conservative with your 401(k) investments, you can make changes to your account to reflect the new strategy.

Also, if you have held the account for a while, the asset allocation of your investments may have changed. You can make changes to the account to rebalance the original balance of your investments.