The stock market had a banner year – great for portfolio growth, less great for asset allocation. And that means it’s time for your annual retirement rebalance.

Asset allocation is all about keeping different kinds of investments (like stocks, bonds, or real estate) in your retirement portfolio. That strategy helps protect you against total losses in case one type of investment tanks…like stocks did in 2008.

How you decide to split up your assets is based on your risk profile, a combination of time and tolerance. The more time left until you need your money, the more time it has to recover from any losses – that lets you take more risk than if you need your money soon. How much risk you can tolerate is completely personal. Only you know whether the ups and downs of the stock market keep you up at night or barely register.

Your risk profile helps figure out what portion of your retirement funds will be invested in riskier investments (like growth stocks) and how much will be funneled into more stable investments (like bonds and cash). And when you originally set up your retirement accounts, you chose investments to match that allocation goal. For example, you might have gone with 80% stocks and 20% bonds.

That mix may not work for you any more, if your timeline or tolerance has changed. Take a look at your risk profile today to see if the plan you have in place still works for you. If not, that’s Reason #1 to rebalance your retirement portfolio.

Reason #2 is all about the stock market. With record highs coming at a record pace, it’s almost certain that your asset allocation is out of whack. Take a look at your current holdings to see how far off they are from your plan.

Here’s an example of what I mean.

Let’s say you had $200,000 in your retirement account [doesn’t matter if it’s a 401(k) or an IRA]. Your asset allocation plan was 80% stocks and 20% bonds…that works out to $160,000 in stocks and $40,000 in bonds.

Now, thanks to a huge stock market rally, your account hit $250,000: $210,000 in stocks and $40,000 in bonds. That shifts your allocation to 84% stocks and 16% bonds. To get back in balance, you’d decrease your stock holdings and increase your bond holdings by $10,000 each.

If you decided not to rebalance in this case, your portfolio would hold a little more risk. That’s fine…as long as the inevitable dip won’t keep you up at night.