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1 Major Retirement Savings Mistake to Avoid

Businessman_400Here’s why you should say “NO” to your own company’s stock when choosing a retirement plan. From The Truth About Retirement Plans and IRAs.

One word explains why you should never invest your retirement plan assets into shares of stock where you work.


This widely admired corporation was ranked #7 on the Fortune 500 in 2000. A year later, it was bankrupt, its $64 billion in assets gone, its $90 stock price reduced to zero.

It’s bad enough to lose your job. But can you imagine losing all the money in your retirement account at the same time?

That’s exactly what happened to many of Enron’s 21,000 employees, who had placed all their money in Enron’s 401(k) plan into Enron stock.

If diversification matters, it’s never truer than it is on this point: Don’t put your time and your money in the same place.

Enron employees are not unique. Even today, after a decade of such debacles as Enron, WorldCom, Conseco, Global Crossing, United Airlines, US Airways, General Motors, Lehman Brothers and many more, employees still tend to place too much money into company stock.

In 2013, according to Morningstar, more than 70% of assets in the 401(k) of supermarket chain Publix was invested in company stock. Ditto for Sherwin-Williams. And the figure was over 50% for 19 other companies, including Colgate-Palmolive, Exxon Mobil, Dillard’s, Chevron, McDonald’s and Lowe’s.

The problem is so extensive that the Financial Industry Regulatory Authority in 2011 issued an “Investor Alert” on the subject. “We are issuing this alert out of a concern that employees who have the opportunity to invest in company stock may be concentrating too much of their retirement savings in a single security. Of particular concern are those who have all or most of their 401(k) assets in their employer’s stock. If the stock takes a beating, so does your retirement savings,” FINRA wrote.

It’s great to see that workers have faith in their employers. But it’s one thing to have faith and quite another to gamble your financial future on it. Remember: Enron’s employees had similar faith.

Do not include your company’s stock in your retirement plan.


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