Direct answer: The annual review checklist at 18-24 covers five areas: verify 401(k) and Roth IRA contribution rates, rebalance if allocation drifted more than 5%, confirm beneficiary designations, review fee levels, and set specific contribution targets for the coming year.
Annual Review Checklist for Ages 18-24
Key Takeaways
- An annual review for 18-24 year olds covers five areas: contribution rates, allocation check, beneficiary designations, fee audit, and next-year targets.
- Increase 401(k) and Roth IRA contribution rates when income increases. A 1% contribution increase per pay raise is a practical rule of thumb.
- Rebalance if any asset class has drifted more than 5% from its target. Inside a Roth IRA or 401(k), rebalancing has no tax consequences.
- Verify beneficiary designations on every retirement account annually. An outdated designation overrides your will.
- Check the expense ratios of every fund you own and replace any fund charging more than 0.10% if a lower-cost alternative is available in the same account.
Step 1: Review Contribution Rates
The annual review starts with contribution rates. Log into your 401(k) plan and confirm your current deferral percentage. Verify that you are at least capturing the full employer match. If you received a raise during the year, consider increasing your contribution rate by 1%. An increase from 6% to 7% on a $50,000 salary adds $500 per year in pre-tax contributions, costing you approximately $390 per year after-tax (at a 22% marginal rate), while adding $500 to your retirement savings.
For the Roth IRA, check whether your auto-transfer amount still aligns with your income and the $7,000 annual limit. If you increased your income and are still transferring $400 per month ($4,800 per year), you have $2,200 of unused Roth IRA contribution space. Decide whether to increase the monthly transfer or make a year-end lump sum contribution before the April tax deadline.
Step 2: Allocation Check and Rebalancing
Review the current allocation of your portfolio across asset classes. At 18-24, a typical allocation might be 90% to 100% in diversified stock index funds with little or no bond allocation. If your target is 90% stocks and stocks have grown to 95%, you can rebalance by adding new contributions to bonds rather than selling stocks (which keeps costs and tax events minimal).
Inside a Roth IRA or 401(k), selling to rebalance has no tax consequences. This makes annual rebalancing straightforward. In a taxable brokerage account, selling appreciated assets triggers a capital gain. Rebalance by directing new contributions to underweight assets wherever possible before triggering taxable sales.
Step 3: Beneficiary Designations and Fee Audit
Check the named beneficiaries on every retirement account you hold. Log into each account separately. Your 401(k) beneficiary and your Roth IRA beneficiary are independent designations. An update at one does not affect the other. Update any designation that no longer reflects your wishes. Name both a primary and a contingent beneficiary on each account.
Review the expense ratio of every fund in every account. Look up the current expense ratio on the fund's prospectus or the brokerage's fund detail page. If you own any fund charging more than 0.10% and a lower-cost alternative exists in the same account, switch to the lower-cost fund. Inside a retirement account, switching funds has no tax consequence. Set specific contribution targets for the coming year, expressed as dollar amounts per account: "Contribute $7,000 to Roth IRA, increase 401(k) to 8% of salary" is more actionable than "save more."
Frequently Asked Questions
When should I rebalance my investment portfolio?
At 18-24 with a long time horizon and a simple portfolio (typically one or two index funds), rebalancing is rarely urgent. A common threshold is to rebalance when any asset class drifts more than 5% from its target allocation. For example, if your target is 90% stocks and 10% bonds and stocks have grown to 96% of the portfolio, rebalancing by selling some stocks and adding to bonds brings you back to target. At this life stage, you can also rebalance by directing new contributions to underweight asset classes rather than selling. Selling and rebuying incurs no tax consequences inside a Roth IRA or 401(k), so rebalancing within tax-advantaged accounts is simpler. In a taxable brokerage account, selling appreciated assets to rebalance creates a taxable capital gain. Annual review is sufficient for most portfolios at this age.
How do I increase my 401(k) contribution?
Log into your employer's benefits portal or 401(k) plan website and find the contribution rate settings. Update the percentage or dollar amount to your new desired level. The change typically takes effect with the next one or two payroll cycles. A practical strategy is to increase your contribution by 1% each time you receive a raise. If your salary increases by 3%, increasing your 401(k) contribution by 1% means you take home approximately 2% more per paycheck while saving more for retirement. The 2026 employee contribution limit is $23,500. Most 18-24 year olds are far from this limit, but increasing incrementally each year closes the gap. Some plans offer auto-escalation: an automatic 1% annual increase up to a cap you set. Enable it if available.
What is a beneficiary designation and why does it matter?
A beneficiary designation names the person or entity who receives your retirement account assets when you die. Retirement accounts (401(k), IRA, Roth IRA) pass directly to the named beneficiary outside of probate and outside of your will. If your will leaves everything to your spouse but your 401(k) still names your college roommate as beneficiary because you never updated it, the 401(k) goes to the roommate. Beneficiary designations override wills. Review your designations annually and after every major life event: starting a new job, getting married or divorced, having a child, or losing a previously named beneficiary. Most brokerages and 401(k) plans allow you to update beneficiary designations online in minutes. Name a primary beneficiary and a contingent (backup) beneficiary for each account.