“Do I have too much in my Lockheed Martin ESOP?” is another common question I get when reviewing 401k statements with clients. Those clients usually fall into two frames of mind: Either “I have no idea and don’t have the time to look at it” or “I love Lockheed and think the stock price will do very well, so I put a lot in the ESOP.”

There’s nothing wrong with either one of those lines of thinking, as long as you are comfortable with the risks of each. So let’s examine the Lockheed Martin ESOP and talk about some of those risks.

What is the Lockheed Martin ESOP?

ESOP stands for employee stock ownership plan or is sometimes called the Company Common Stock Fund. Lockheed contributes their company match to the ESOP bucket and if you’ve elected, you can add money to the ESOP as well. Every time money is put into this bucket, you are purchasing shares of Lockheed Martin stock (LMT).

Generally, if the price of one share of Lockheed stock moves up by 5%, the amount of money you have in that ESOP bucket will go up around 5%. Same if the stock price were to go down 5%, the amount of money in the ESOP fund (not your entire 401k balance) could go down around 5%.

How much is “too much” in the Lockheed Martin ESOP?

This is a pretty difficult question to answer being every 401k participant might have different levels of risk they are comfortable with. Generally, I’d suggest no more than 5-10% of your net worth in the ESOP fund.

Don’t be like this guy and invest too much into your company ESOP

I know that may seem low to some, especially if you are really in love with the company you work for, but my biggest reasoning is you already depend on your paycheck coming from Lockheed. You don’t want to also depend on a large portion of your retirement income being based on the value of Lockheed stock.

Most of you probably remember a solid tech company that was raking in the dough and hiring a ton of people in the early 2000s. Those employees loved their company as well, and dumped a majority of their 401k balances in the company stock because they believed in the company. Then everyone heard about that company and the name Enron became a household name.

Those employees not only lost their incomes, but also a majority of their retirement savings. So keep an eye on your balance in your ESOP fund (especially when you see a big jump in the LMT stock price) and reallocate as needed.

How much should I be contributing to the ESOP?

This is a little easier to answer. Figure out how much you are contributing to each investment bucket when you make a contribution to your 401k. If you are contributing to the ESOP with your own dollars, also figure out how much the company is sticking in there as well. Just make sure

How do I rebalance my Lockheed Martin ESOP?

You can make unlimited withdrawals from the ESOP fund to put in other investments inside your 401k. If you choose to rebalance (take money from the ESOP fund and spread it over the other accounts according to how you have your 401k allocated) it does count towards the 12 transfer/year limit however.

You’ll need to log in to your Voya account to make any changes to your 401k.

If you have additional questions about the Lockheed Martin ESOP fund or the 401k in general, feel free to email me at Brian@TheAeroAdvisor.com or fill out the quick and easy form below and I’ll get back to you.