A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Thursday, April 28, 2005

Don't Keep Too Much Employer Stock in Your 401(k)

Most financial planners say that a person should have no more than 10% of their total assets in employer stock. But, according to the Retirement Confidence Survey, nearly 25% of 401(k) participants whose plans offer an employer stock option have at least half of their assets in that option. Here's another startling observation: more than 10% of workers have 90% to 100% of their account in employer stock.

In some cases the employer's matching contributions are paid in company stock, making the employee responsible for rebalancing their 401(k). Not rebalancing leaves them facing a huge amount of risk. According to an article entitled "Too Much of a Good Thing," in the May issue of Kiplinger's Magazine, an account balance of $200,000 in insurer Marsh & McLennan before their bid-rigging allegations would be worth $132,000 today. That's a 34% DECREASE! Nobody should have to go through that!

The point of all this is the importance of having a balanced approach when saving for retirement. Don't fall in love with your company's stock. It could end up being a fatal mistake for your retirement plans!

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