Are you wondering if your 401(k) is carrying too much risk? Here’s a quick guide to help you figure it out.
If most of your money is invested in stocks, your portfolio might be on the riskier side. That’s great if you’re decades away from retirement, as stocks have a lot of growth potential over time. But if you’re nearing retirement, having too much in stocks can mean big ups and downs that might hurt your savings when you need them most.
Here are some signs to watch for:
- Your 401(k) balance swings wildly. Big gains but also steep drops.
- Market downturns make you anxious or tempted to withdraw funds.
- You’ll need cash in the next few years but haven’t shifted to safer investments yet.
A simple rule to keep in mind is to subtract your age from 100. That’s roughly the percentage of your portfolio you may want to keep in stock. So, at age 40, 60% in stocks is a good percentage; at age 65, it’s less.
If your 401(k) feels too risky, consider gradually moving money into bonds or cash, or try a target date fund that automatically adjusts your investments over time.
Not sure what’s best for your situation? Reach out to a financial professional for personalized advice.
And if you are an entrepreneur who finds managing your finances overwhelming, especially when it comes to bookkeeping or payroll, we’re here to help! Contact us anytime for support with your business bookkeeping and payroll needs. We can be reached at 310-534-5577 or contact@abandp.com.
