What Is Your 401k Invested In?

Do you have a 401k? If so, do you know what it is invested in? The standard investments inside of a 401k are stocks and bonds. Most likely you are invested in variation of stocks and bonds. Regardless of what you are invested in you should know what those investments are because you may come to find out that you are invested in some more risky options that you otherwise might not want to be invested in. One thing you may come to find out or may already know is that you are invested in your own companies stock. 

Only 12% of plans make matching contributions using company shares which is down 45% from 2001. Even though this number is down there are still many plans that let workers invest in employer share as an option. Those that have the option for company stock it typically represents around 14% of employees' portfolios. 

While 14% of a portfolio is nothing to be too worried about there is still a higher risk in holding company stock inside a 401k. The following are a few suggestions if you are investing in company stock with your 401k:

  • Know your company! It is very easy to feel like you know more than you actually do when it comes to your employeer. You can't be prideful here. Learn more no matter what you think you know. You just might come to find out that your company stock isn't quite as good as you thought it was.
  • Cap your company stock. There are retirement specialists who would suggest that you shouldn't hold any of your employer's shares in your 401k. If that is not realistic, limit your percantage to 5% or 10%. While this isn't enough to ruin your retirement if your company goes belly up, it is enough to give you a decent lift if your firm turns out to be the next Google or Apple.
  • Look to invest elsewhere. You already have your salary, bonus, health insurance tied to your company which makes it a wise decision to look elsewhere for the bulk of your 401k investments. There are plenty of things you can do with your 401k if your employeer will allow you to invest with your 401k. A self directed 401k is a popular option for those looking to invest in things that they love or are interested in. It is also a great way to diversify your portfolio away from stocks and bonds. A self directed 401k allows you to invest in alternative investments like gold and real estate but it doesn't end there. 

There are so many different investment opportunities available to retirement accounts and being able to take advantage of them can greatly improve your retirement and retirement portolio. 

If you are interested in a self directed 401k talk with your employer to see if this is something available to you. Feel free to contact us for any more information as well as help setting up a self directed 401k.