I am now in my 22nd year of providing investment advice to individual 401(k) participants. Many of my 401(k) advice clients have well over six-figure balances.
Most of these individual investors have a desired retirement plan date in mind. They are concerned about a potential stock market meltdown.
401(k) account management a few years before retirement is about preserving principal. It takes an entire working career to build up a 401(k) retirement plan account. The next great stock market decline could turn your 401(k) into a 201(k) in a few months.
401(k) principal preservation is different. It is not the same investment management strategy as growing a 401(k) account value.
I tell my clients they only need to reach a six-figure company 401(k) retirement plan account balance once. They do not need to take the stock and bond market risks associated with doing it a second time.
The Federal Reserve is confident in raising interest rates going forward. The U. S. stock market have reacted negatively so far. There is an elevated level of 401(k) principal risk now as I can remember at any time in the last few years.
Can you withstand a large 401(k) account principal loss? This is an especially important question to ask if you close to your desired retirement date.
You cannot worry about what your friend, co-worker, or relative is doing or not doing to manage their 401(k) risk. Your 401(k) stock and bond market risk tolerance level are unique to you.
You currently own stocks and bond in your company 401(k) account. You are 100% invested now and adding more money each month. There is a great deal of money at stake for you now.
Your biggest 401(k) risk now is no plan for the preservation of the last several years of stock and bond market gains. Along with your personal, and company-matching contributions.
It is hard enough to get rich once. Do not force yourself to have to get rich twice. You are running out of working years.
Ric Lager
Lager & Company, Inc.
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