401K Experts- Advice needed on asset allocation

[busy mom]

OK, so my goal is to retire in 13 years. Does anyone have a good recommendation on what percentage of my 401K should be in fixed vs. stocks/bonds? I am really a financial dummy when it comes to this stuff, but am beginning to worry that I will not have enough to retire on.

Any financial "experts" out there?????

 

[bellarella]

There is no hard and fast rule -- especially in your situation. The closer you get to retirement, the more you want to minimize your volatility risk and start moving towards bonds and cash equivalents. However, these types of investments have lower rates of return, so they aren't going to help you to "catch-up" for a savings shortfall. If you are behind in your savings goal, then you may want to be more aggressive with your investment. This, however, will give you a lot of exposure to the possibility that your investments could decline in value.

You might want to sit down with a financial planner. Places like Charles Schwab will talk with you generally if you have accounts with them. They aren't being paid on placement. Your advice will be more generic, but they shouldn't be pushing you toward high fee investments. If you want more customized advice, you can look to hire a CFA who can go over your plan. You'll want to find one that works on a fee basis from you, not from the investments you buy.

Somethings you'll want to look at are:
1. What type of expenses you expect in retirement
2. How much you have saved now
3. Whether you have to retire in 13 years or just want to (if it is a desire rather than need then you might be able to be a bit more aggressive in your asset allocation and live with the risk that you might need to work an extra 5 or 10 years if your investments decline)

Good luck!

 

[Pakey]

I'm the 401k administrator for our corporate plan. Our 3rd party administrator will do complimentary financial planning for our participants. I'd start by checking with your corporate plan administrator to see what services are available to you.

 

[busy mom]

Any more suggestions???

 

[msmayor]

Any more suggestions???

Honestly? Don't get your advice here.

Nothing personal against those who post, but asset allocation is a very personal thing and is directly related to your tolerance for risk. The asset allocation that one person may swear by can be FAR too risky for another.

You need to answer a lot of questions about how 'safe' you want your money to be from drops in value, and what type of investment returns you want to get. You need to examine the amount of money you have now vs. the amount of money you think you'll need when you retire to decide how to best maximize your returns to meet your goal. Your age and ability to save along with personal family situation will factor into your allocation decisions.

No one here knows what investments are offered by your employer for your 401(k), and not all similar investments are created equal, which means the stock fund your employer offers may not be as good as the stock fund another employer offers.

My suggestion is to start reading up on risk tolerance and asset allocation. Educate yourself, and as others have suggested talk to the Administrator of your company's plan to learn about the investments offered. Then you'll have the tools necessary to make the right decision for YOUR situation.