The 401(k) Blunder That Could Torpedo Your Retirement

Core Insights - The article emphasizes the importance of reducing stock exposure for individuals nearing retirement to lower overall risk [1][4] - It highlights the potential severe consequences of heavy stock exposure, particularly referencing the nearly 40% drop in the S&P 500 in 2008 [2][4] - The article suggests a balanced approach to asset allocation, incorporating bonds, cash, and CDs to mitigate risks associated with market fluctuations [5][7] Group 1: Risks of Heavy Stock Exposure - Retirees with significant stock exposure face severe risks, especially during market downturns [4] - The S&P 500's nearly 40% decline in 2008 serves as a cautionary example for those considering retirement [2][4] - The sequence of returns risk is highlighted, indicating that negative market returns late in one's career can have detrimental effects on savings [3] Group 2: Recommendations for Asset Allocation - It is advised to lower overall risk by diversifying investments with bonds, cash, and CDs [5][6] - The "rule of 100" is mentioned, suggesting that individuals should subtract their age from 100 to determine an appropriate percentage of stock allocation [4] - A well-crafted asset allocation strategy that includes a mix of securities can significantly lower risk [7]