Many pre-retirees have a good portion of their retirement savings tied up in the company they work for through their employer’s stock. Whether it is in the form of an employer-sponsored retirement plan like a 401(k), vested stock options, or simply by choice, it is crucial that you determine if your company’s stock is the best place for your money to be.
Sometimes, investing in your company can be a smart move. Other times, the company may take up far too large a space in your portfolio, leaving you vulnerable if things go south. This is especially true if you have a 401(k). After all, you already rely on your employers for day-to-day income, so it may not be wise to tie the bulk of your future savings to them as well. To be frank, having a large portion of your savings tied up in any single position is always a risky move.
If you are investing in your company’s stock, ask yourself why. Is it because of how your company’s 401(k) is allocated? Is it out of a sense of loyalty? Or is it because you know it is a good investment?
The answer for most pre-retirees is usually one of the first two reasons. Most people have neither the time nor the training to understand if their company’s stock is under- or overvalued, and it is important to note that you can’t simply rely on a stock ticker. Remember, just because a stock is going up today doesn’t mean it will go up tomorrow, and vice versa. So, most pre-retirees simply don’t know whether their company represents a good investment or not.
This is one of those issues I mentioned that many pre-retirees don’t really think about: Having too much of their savings tied up in a single, concentrated position. So, if this applies to you, it’s critical that you take a very close look at whether investing in your company’s stock is wise — and if so, how much of your money should actually be invested. If you ever need help with this, I would be happy to give you a second opinion on any company stock you may own.
