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!

Tags: Retirement Planning, 401(k), Employer Stock