Extreme market volatility has disrupted even the most sound retirement accounts, throwing asset allocations out of balance and risking future potential growth. Here’s how you can get your 401(k) account back on track.

For most 401(k) investors, the economic and market turmoil has had a sobering effect on their employer-sponsored plans. Still, as difficult as it may be to review your 401(k), now is an important time to take a hard look at the way your account is constructed.

Bull markets mask flaws in a portfolio because people tend to take gains for granted. But when markets struggle there is less margin for error, so underperforming investments or imbalances in the way your portfolio is structured can really stand out.

A careful review of your 401(k) can help you identify changes that can strengthen this important retirement vehicle. Here are six ways to help you correct any imbalances in your plan that the market may have created, and position your retirement plan for better times ahead.

Check your diversification. A 401(k) plan might offer 15 or 20 fund choices, ranging from conservative fixed income to aggressive growth equity funds. Yet, many 401(k) participants’ investment dollars are concentrated in just two or three funds. This is especially risky in a contracting market because holding even one or two underperforming funds could have a damaging impact.Make sure you review your asset allocation carefully, and choose your investment options across the risk spectrum.Keep in mind that diversification does not ensure a profit or guarantee against a loss.

Rebalance. Make sure your choices reflect your personal risk profile and your nearness to retirement. For example, a moderate investor might target a mixture heavily weighted to large-cap growth funds, large-cap value funds and fixed income, with significantly less in international equities and cash. But market volatility can easily skew those proportions—some funds may drop sharply while others maintain their value or even gain. As a result, your asset allocation will change without any deliberate steps on your part.

You should consider your 401(k) in the context of your overall assets. The sum total of your holdings—not just your 401(k) investments—needs to be in balance. You may find that it really pays to sit down and discuss all your retirement assets with your financial advisor.

Identify poor long-term performers. Checking each fund you hold against its peers can help you determine whether that fund’s performance, good or bad, is due to market forces or underlying fund problems. You can tell how a given fund has performed over the past one, three, five and 10 years, relative to an index of similar funds provided by monitoring agencies such as Morningstar or Lipper. You could have a good fund manager who performs badly in a given year, but if the longer perspectives also show the fund underperforming against the respective benchmark, you may want your money in another fund.

Assess fund fees. Some funds charge fees (typically a percentage of your overall purchase) when you buy shares, and again when you sell. This can become costly as you adjust your portfolio. Funds that charge according to the “net asset value” of your holdings don’t carry these transaction fees. When checking fees, that should be the first thing you consider.Make sure you examine a fund’s prospectus for a list of all the applicable fees.

Keep in mind that individual funds vary widely in terms of their operating expenses. Check the operating expenses for your holdings against the average for those in your plan and the benchmarks for similar funds, using guidelines from Morningstar or Lipper. A financial advisor can help you make these comparisons.

Implement changes carefully. Adjusting your portfolio during a troubled market raises a fundamental question: How can you avoid losses from selling at depressed prices? If your portfolio is only moderately imbalanced, one simple strategy is to apply your changes moving forward with each new contribution from your paycheck. Over time, your assets can rebalance without selling a large number of shares.

If, however, you uncover a serious imbalance or funds that simply aren’t performing, it may be best to make changes even if it means incurring short-term losses. Over time, the value of having a balanced portfolio and strong funds should more than make up the difference.

Evaluate the features of your plan. Even the best 401(k) strategy will be hard to implement if the plan itself offers few choices or restricts your ability to change investments. It’s best to have an open architecture with multiple funds and managers, rather than being locked into one proprietary fund family. Some plans limit your ability to transfer in and out of asset categories, or charge you a fee for it.

If you feel your plan is too restrictive, you may want to consider an “in-service rollover,” which allows you to roll part or all of your assets into a separate IRA that offers a wider array of choices. This allows you to keep your 401(k) active, so that you can continue making contributions from your paycheck and receiving any matching contributions offered by your employer, while enjoying greater flexibility and control over those assets.

Not all company 401(k) plans offer this option, and you’ll want to consult with your financial advisor and tax professional to weigh the potential benefits against any possible tax impact. (Note that in-service withdrawal payments are taxable if not deposited into an eligible retirement plan or account within 60 days of receipt.You may also owe an early withdrawal penalty.)

It’s not inevitable that assets leak out of your 401(k) by virtue of changing markets, poor choices or high fees. By taking your plan through this six-step process, you can see to it that your retirement savings account is positioned to weather turbulent markets and make the most of more bullish times.

Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither Merrill Lynch nor its financial advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their professional advisors. Asset allocation and diversification do not assure a profit or protect against a loss in declining markets.