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Retirement Planning – Investment Allocations

Q: Hello, I am currently 11 years from retirement but unfortunately I have just gotten interested in exactly how my money is being invested. I had a quick question on selecting investments for my 401k account. Here is my current allocation which was automatically set by my employer (except I changed my 2025 target fund to a 2040 target fund so I could have a little more stock and a little less bonds. I was planning on changing that back when I am about 4-5 years from retirement)… FUND NAME – (TICKER SYMBOL) – % OF 401k VALUE -COCA-COLA STOCK FUND – (KO) – 30.19% -JPMCB SMART RETIREMENT 2040 FD CF-B – (N/A)- 16.98% -MFS INSTITUTIONAL INTERNATIONAL EQUITY – (MIEIX) – 1.89% -NORTHERN TRUST S&P 500 INDEX DCNLT3 – (N/A) – 35.85% -STABLE VALUE FUND – (N/A) – 9.43% -US CORE PLUS ACTIVE FIXED INCOME – (N/A) – 3.77% -US LARGE CAP ACTIVE EQUITY FUND – (N/A) – 5.66% Below are the other choices I am allowed to invest in… FUND NAME – (TICKER SYMBOL) International -LAZARD EMERGING MARKETS C – (N/A) -NORTHERN TRUST ALL COUNTRY WORLD EX-US INVESTIBLE MARKET INDEX FUND Mid-Cap -US SMALL-MID CAP ACTIVE EQUITY FUND – (N/A) Mixed Asset -WELLINGTON BALANCED REAL ASSETS – (N/A) Income/Bond -NORTHERN TRUST AGGREGATE BOND INDEX NL TIER 3 – (N/A) Capital Preservation -WELLS FARGO STABLE RETURN FUND Q SHARES – (N/A) The only stock I am not allowed to sell is the Coca-Cola stock (KO). If you could please let me know if I am taking advantage of the best funds my 401k has to offer and maybe give me some suggestions and the percentage I should be invested in each fund it would be GREATLY appreciated….or anything else you might suggest. Thanks for your help!

 


A: Based on the information provided, you are currently aggressively allocated in an 85% Growth (US & Non US Stocks) and 15% Income (Bonds) portfolio, which is similar to the allocation of the JPM 2040 Retirement Fund you are holding.

 

While it is difficult to make a recommendation because I don’t know if you have any other retirement accounts outside of your 401k and how those are allocated, I feel this may be overly aggressive if you plan to retire in 11 years.

 

If this is your only retirement account, and you are 11 years away from retirement, I would recommend moving toward a more conservative portfolio as you get closer to retirement.

 

If you want to be more aggressive now, you can hold the 2040 fund, in addition to your KO stock for the next 4 to 5 years and then transfer to the 2025 fund (plus KO stock) for your remaining 6 to 7 years until retirement. The great thing about holding a target fund is that they are very well diversified and reallocate to a more conservative portfolio each year automatically.

 

Conversely, if you want to be more hands on with your investments you can hold a balanced mix of growth and income funds and reallocate your portfolio each year until you retire, but it isn’t necessary to do both.


 

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