Investing in 401(k)


Q: I work for USDA. I will retire at the end of December 2012 as a GS-14, Step 7, $126,251 – FERS. I am taking full Social Security. I was born in June 1943. My monthly Social Security entitlement is about $2,350, and I have 25 percent taken out for federal taxes. I am investing in the L-2020 401(k) TSP fund. I plan to keep my money in the 401(k) after I retire. Is keeping my retirement savings in the L-2020 fund in retirement a good strategy? I figure the fund is diversified nicely with conservative and aggressive funds. I should have about $400,000 in my TSP 401(k) account by the time I retire (assuming we don’t have another freefall like the one a few years ago). Do you think that I could take 3 percent out of my 401-K without decreasing my principal greatly?

A: Unfortunately, I can’t judge your strategy since I don’t know enough about you, your goals and circumstances. In addition, what’s a good investment allocation today, may not be good for you tomorrow. You should select the allocation that will most likely support your needs going forward, then monitor your progress and adjust the allocation when necessary to either reduce or increase the portfolio’s risk. This takes some careful analysis and ongoing attention. This is how pension funds are managed (when they’re managed prudently).


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