401 (k)s: Reboot Your Retirement - Open Your Statements!
The stock market was pretty scary for a while, but now with S&P 500 up 45% from the lows, it's time to wake up out of your fear-based stupor, open your 401 (k) statements and take control of your retirement!
Maggie Rodriguez of the CBS Early Show and I discussed how to proactively re-boot your 401 (k) by following some rational steps.
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The core lesson to be learned from a bear market is to understand what kind of investor you were during the depths of the lows. Here are three categories to consider:
1) SLEPT LIKE A BABY
- Portfolio was less than 30% invested in risky assets, like stocks or real estate OR
- You had more than 20 years before you needed the money OR
- You were oblivious and/or in denial
- Portfolio had approximately 50% in risky assets OR
- 10-15 years before you needed the money OR
- You knew you should be doing something, but didn't know what to do
- Portfolio had more than 70% in risky assets OR
- Less than 10 years before you needed the money OR
- Believed that the Great Depression was coming
With that information in hand, here are some general guidelines for reallocating your money.
RISK TOLERANT
- > 30 years: 50-70% risky assets
- > 20 years: 40-60% risky assets
- 5-15 years: 30-40% risky assets
- > 30 years: 40-60% risky assets
- > 20 years: 5-30% risky assets
- 5-15 years: 0-30% risky assets
- Reduce risk by at least half, maybe more
- Don't chase the market higher
- Save More
- Save more money-401(k) limit this year = $16,500 + $5,500 if > 50
- Spend less in retirement years
- Work longer-this has the most significant impact on retirement savings