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Do I Really Need to Contribute to a 401(k)

By: iStockAnalyst Sunday, July 15, 2007 10:29 PM

A common tool company uses as an incentive to employees to purchase company stock is to sell it to them at discount with the stipulation they must own it for a certain period of time before being able to sell it. If they are dollar cost averaging every month, it may make sense to sell off a few of their older shares periodically. Most companies use a first in, first out basis for accounting their shares. This encourages employees to hold on to their company stock and build loyalty between the workers and the company. Once again, common sense still needs to be applied when debating whether holding too much company stock is too much. (Note certain key employees and company officers may be required to file with the SEC before selling or purchasing.)

So here are a few pointers that one must pay attention to:

Be active in overseeing your retirement plans, monthly payroll deductions does not mean cruise control.

Rebalance your entire portfolio regularly to ensure optimal performance.

Stay diversified.

Be cautious at 10% of your assets in company stock or any other stock, at 20% you are pushing an extreme danger zone.

Money sitting in cash or other conservative investment options will not out perform inflation. These options should be considered a short term parking spot for cash until a high performing vehicle can be identified or you are near or have exceeded your retirement nest egg goal.

If plenty quality investments exists with in your 401(k) plan which fits your particular asset allocation, and you have maxed out your other outside investment options that fit you scenario consider increasing your contribution. Your contribution limit for your 401(k) is $15,000 and an extra $5,000 catch-up for those workers over 50.

Max out the match. If your firm doesnt match, max out your other retirement resources and contribute to your 401(k) your excess investment dollars.

Never drop out of yo

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