Employees Still Taking Huge Risks with Their 401(k)s

We've been writing for years about the huge risk employees take with their 401(k) savings when they invest a large portion in the company stock of their employer. And while the trends have improved over the years, this new Forbes report indicates a whole lot of employees have yet to get the message.

For example, when we last wrote about this issue in December 2007, 57% of the assets in Coke's 401(k) plan were invested in Coke stock. Forbes says that level is 51% today. Better, but not much.

Let me put it bluntly for the benefit of new readers. This is one of the biggest risks "normal" people take with their retirement savings. It's also one of the most easily correctable ones, in most cases.

I've heard people agonize about the decision to reduce the amount of company stock they own. In many cases they legitimately believe their employer is a great investment — significantly better than the alternatives they would invest in if they were to sell company stock. Some of them are even right about that.

Unfortunately, it's a risk you can't afford. The landscape is littered with the carcasses of blue-chip, brand name companies whose employees never dreamed they would fail. And yet they did. You simply can not take the chance that your retirement savings will be devastated at the same time you lose your job and benefits. That's way too many eggs for any one basket, no matter how confident you are in that basket.

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Mark Biller is Sound Mind Investing's Executive Editor. Learn more about Christian investing and finances at the Sound Mind Investing website.