Most likely, your
401(k)
account represents one portion of your long-term retirement assets.
If it’s part of a portfolio that includes an
individual retirement account (IRA),
taxable investments,
and perhaps a pension or
deferred
annuity,
you might concentrate your 401(k) contributions in
just one or two of the best performing alternatives your plan
offers.
For instance, if the
large-cap
stock
fund that’s available through your 401(k) is a
top performer in its class, but the small-cap fund delivers consistently
disappointing returns, you may want to invest a higher percentage
of your contributions in the large-cap fund, and invest in a small-cap
fund of your choice in your IRA or taxable portfolio. Or, if you
have a separate investment portfolio that is heavily invested
in bonds, you may want to concentrate more of your 401(k) in stocks,
or vice versa.
But if your 401(k) is the only money you’re
putting away for retirement, you’ll want to balance your
portfolio using different types of investments, seeking the greatest
possible return while
diversifying
to reduce risk.
If your 401(k) has strong investment
choices and reasonable fees, it's usually smart to
put as much money into it as you can. Sometimes, that
means coming up against the annual federal limit — $15,500 in 2008. But when you
hit the limit and can afford to salt away more, you
may want to consider a
traditional
or
Roth
IRA, or a taxable account.
