Are you being too risky with your 401(k) account?
According to a CRR brief, nearly three-quarters of 401k/IRA assets are allocated to stocks. That means that a substantial portion of household financial assets were exposed to the recent stock market drop. While the market has largely recovered since then, it remains very volatile and exposes your retirement savings to continued market risk.
As you accumulate wealth and approach retirement, higher levels of equity exposure in volatile markets can work against you. It can cause significant stress when your balance fluctuates, given the larger dollar impact and shorter recovery times before you need to tap into your retirement assets.
Consider how a hypothetical 20% TDF portfolio loss might affect two people, one at age 25 and one at age 60.
We should look beyond past investment performance and be prepared for the reality of volatility. A well-structured portfolio that matches your risk to goals and behaviors across a broad range of possible market scenarios can reduce the impact of volatility.