By KARIN PRICE MUELLER
STAR-LEDGER STAFF

Ah, the beauty of the 401(k).

Your contributions are pre-tax, lowering your taxable income. And the investments run on autopilot. Overall, a 401(k) is a worry-free savings vehicle.

But that doesn’t mean you should ignore your account.

Once a year, you need to give your 401(k) a check-up. Here are the three things you should do to keep your 401(k) healthy, wealthy and wise:

1. REBALANCE YOUR PORTFOLIO
If you read your annual statement and see your 401(k) earned money, that’s good. But a closer look will probably show your asset allocation is out of whack. Certain asset classes had strong returns last year. Real estate, for instance, was up 35 percent, said Michael Gibney, a certified financial planner with Highland Financial Advisors in Riverdale.

“If your intended allocation to a particular asset class is 10 percent, and, because of the strong return, it has increased to 15 or even 20 percent, your exposure has increased and it may adversely affect your portfolio if that asset class has an off year in 2007,” Gibney said.

Further, if one or more asset classes have increased a certain amount, there is a good chance a few others have decreased, so it is important to bring them back into balance.

You should also take care to see how much of your 401(k) is invested in company stock, especially if your company only allows matching funds to be allocated to shares of the company. Jack Oujo, a CFP and certified public accountant in Wall, says one of the biggest mistakes he sees among potential clients are 401(k)s with too much in company stock.

“It took a lot for me to get clients to sell Lucent for diversification purposes, and they were glad they did,” Oujo said. “Too many people got burned on too much company stock.”

Oujo generally recommends no more than 4 percent of assets in any one stock, but with company stock, it’s okay to go up to 10 percent, because of some of the perks employees often receive for buying and holding.

2. CONSIDER NEW OFFERINGS
Employers often add investment options to 401(k) plans. Many plans are offering more diverse choices, such as real estate, commodities or foreign bond and stock funds, Gibney said, and they often replace underperformers with more consistent performers.

Oujo said you should consider the track record of the offered fund versus other funds in the same asset class. He suggests using Morningstar (www.morningstar.com) to get a quick view of how the fund has done compared with similar funds. You might find the new choices are better historical performers than the old ones.

3. BOOST YOUR CONTRIBUTIONS TO THE MAX
You should always try to max out your 401(k). Any amount contributed is made on a pre-tax basis. That is, if your salary is $100,000 and you contribute $15,000 to your 401(k), you are only paying income taxes on $85,000. And by maxing your contributions, you stand a better chance of reaching your long-term goals.

If your company offers matching funds, contribute at least the amount necessary to take advantage of the full match.

“If you are lucky enough to have received a raise in salary, it may be time to think about increasing your contribution percentage,” Gibney said. “If you were living comfortably on your old salary, and feel you will just spend the salary increase, why not boost your contribution instead?”

For 2007, allowable contributions have increased from $15,000 to $15,500, plus another $5,000 “catch-up” contribution for those age 50 or over.