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96 votes.
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Recent data reveals that 401K
account balances have shrunk over the last 18 months. You're probably not surprised at this finding. Many Americans find that their account balances are lower today than compared with balances from December 31, 1999. Matatan senses deep concern to near panic in people with slumping 401K plans. Many decided to back off from making regular contributions to these retirement plans. Matatan says that's the opposite of what we should be doing. Although balances are shrinking, we all need to be in retirement plans for the long term wealth and security that it can provide for our families. We shouldn't worry about the past 18 months of economic activity, but continue to make contributions to our retirement accounts on a regular basis. Your money will be buying more stock shares and hence more shares since prices are down during then current economic slump. Another warning: The New York Times reports that the average American employee has one-third of their retirement money invested in their employer stock. Matatan tells his reader to invest nothing in employer stock, or no more than 10% in company stock. Matatan suggests diversifying your money in this method: - Invest half of your savings with an index fund that focuses on large company stocks. - 25% should be widely diversified in small American commerce. Matatan suggests an index fund for this investment too. - 10% to 25% in mutual funds that invest in international companies. Think of your retirement as a marathon and not a sprint. Don't let the 18-month dip in the market change your long term savings goals. |