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... in a company 401k.(60% company stock,40% target date retirement plan. Should I cancel the target date plan, and re-allocate (i.e. 20% company stock, 20% S&P, 20% bond, 10%cash etc? I have a separate Brokerage and also a high APY online savings.?

Jul 21, 2012 by Larry from Brooklyn, NY in  |  Flag
6 Answers  |  9 Followers
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4 votes
Ryan Level 19

Larry, there might be a legitimate reason to keep the target date retirment fund by my experience is that generally once you pick apart the target retirement date fund, there are some issues that need addressed. Some target date funds are far too aggressive while others might hold underlying mutual funds that could be 100 % proprietary, could hold the wrong types of bond funds, or might have access to a limited choice of possible investments. Sometimes a full change from a target fund is needed or sometimes a more gradual implementation is best - it will likely depend on many factors including what other fund choices are available. I think I would agree that a best option is to seek out a fee only advisor to meet with and help craft your new investment strategy.

View all 4 Comments   |  Flag   |  Jul 31, 2012 from Gettysburg, PA
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Flag |  Jul 30, 2017
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Herbert N Glass Level 18

Larry, With respect to you moving out of the target date fund, I would only advise moving it if you were not happy with the amount of risk that is inherrent in the specific target date fund is not to your liking. That is, if you want to be invested in a more risky fund then you can pick a target fund with a date that is later than the dated fund you are in now, and if you want to be more conservative, then you should consider a target date fund that is dated before the one you are in now. I like that you have some money in a Target fund primarily because it has an asset allocation that is chosen and constantly watched by a professional investment manager. Also, because as you get older, the funds asset allocation is changed by the manager to become more conservative (which is exactly what people should do with their investments as they age).

Although you have not asked the question, because you apparently are thinking of putting more of your 401(k) plan monies into your company's stock, I want to address that issue. Based on my experience and investment education, it has been said that the textbook view of employees placing a high percentage of their retirement monies into their own company stock is not a wise thing to do. The reason this is said is that because when one relies on the same company continuing to employ them and they also have a lot of their company's stock, is usually not considered to be diversified enough and their future is too dependent on the company continuing to do well and for them to continue to be employeed by that same company. Furthermore, it is said that if the company has some bad years, a scandal, or anything else that depresses its stock, where would the employee be if they also lost their job as well? Even if they are a high level executive with a position on the Board of Directors, they may think they know all there is to know about the future profitability of the company (because they are an insider), that is still not a guarantee that they know enough to protect themself against many of the negative possiblities that could occur to the company. So, please be careful and make sure that you are not overdeployed in your company's stock. This is a rule as far as I am concerned. The rule also includes reducing ones holdings of their company stock ownership percentage of their entire investment portfolio as they get closer to retirement.

Good luck with your decision making.

Herbie Glass, Glass Retirement Strategies, Inc.

1 Comment   |  Flag   |  Jul 22, 2012 from Franklin, MI
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Flag |  Jul 30, 2017

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2 votes
Eric Level 17

I'm not a fan of target date funds, especially if you are combining them with a seperate strategy. I would recommend talking wi th a local fee only independent advisor and get an asset allocation built for your situation and options.

2 Comments   |  Flag   |  Jul 21, 2012 from Denver, CO
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Flag |  May 23, 2017
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Flag |  Jul 30, 2017

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2 votes

Larry, as I read your post I am far less concerned with the target date fund than I am with the amount of your 401(k) in your company's stock.

Jon Castle http://www.WealthGuards.com

1 Comment   |  Flag   |  Jul 23, 2012 from Jacksonville, FL
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Flag |  Jul 30, 2017

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2 votes

Larry,

I am not a complete fan of Target Date funds. If you would like a brief overview on video, check out the following link. It is a vlog I did on target date funds a while back. http://youtu.be/Iq2BEYRP5qI

2 Comments   |  Flag   |  Jul 31, 2012 from Austin, TX
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Flag |  May 23, 2017
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Flag |  Jul 30, 2017

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0 votes

Larry, basically the target date funds might be your best bet if you are not getting professional advice. If you were working with an investment advisor that was helping you allocate your 401k he/she would probably do something different that is more in line with their strategies at the time. In my opinion, the target date is an alternative to a professionally managed 401k allocation. Unless you have a really good idea of how the options you select in your 401k will work together, and the details of those investments, I would be hesitant to change target allocation.

1 Comment   |  Flag   |  Aug 01, 2012 from Abilene, TX
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Flag |  Jul 30, 2017

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