What 401k mistakes do Lockheed Martin employees (and employees of a lot of other companies out there) typically make? Your 401k is most likely the most important retirement vehicle you’ll have when you retire. But why do so many people not treat it that way? Below are a few common mistakes I see with 401k participants.
- Trying to time the market. Recently, the market has been sent on a wild ride with the COVID-19 pandemic and inflation wreaking havoc on our world. When the market takes a dip, people tend to talk about it, including the news outlets and social media. People will log on to their 401k site more often when things are tough, which might make it more likely for you to want to make a change. Should I go to cash? Should I change to more conservative investments? A change in your plan is even more possible when you hear the guy at the water cooler talking about moving to cash until things “return to normal.” What is normal? Does normal mean the market is higher than when you went to cash? If you let emotion drive your decisions you could be using the very unproductive investment strategy of selling low and buying higher. Ouch. What should you do when the market drops? Read more HERE.
- Investing too heavily in the company stock plan. This is another one I see a lot. You might love Lockheed and feel like you’ll stay there forever. That’s ok. But you already depend on the company on your monthly income, health insurance, life insurance, etc. Why stake a huge portion of your retirement in the Lockheed Martin stock price? Typically you don’t want to have more than 5% of your net worth wrapped up in your company stock. Read more by clicking HERE
- Asking a co-worker for investment allocation advice. This one can be painful. The best example of this I’ve seen is a new employee, fresh out of college that asks his new boss – who has been there 25 years, what he is doing in his 401k. That manager might be just a couple of years from retirement and might be more conservative, or might be sitting on a nest egg and not need any growth in his company plan. So young, new employee invests too conservatively and isn’t getting the maximum out of his company plan over the long term. Make sure your plan’s investment options and allocations align with your overall financial goals, not someone in the next office over.
- Not choosing the right contribution option. You should always consult with a tax advisor or investment professional to see which option (regular pre-tax or Roth 401k option) is the right way for you to invest in the Lockheed Martin 401k. Pre-tax contributions can reduce the amount of taxable income and reduce your tax bill each year. The Roth 401k has special tax treatment for the gains in the account, but doesn’t give you the income reduction in the year you make it. Make sure you do some research and consult with a tax advisor and/or financial planner to find out which option might be best for you.
- Not putting in up to the company match. We’re talking free money here people. No matter what you think of the market, politics, astrology, etc., make sure you’re getting the money the company adds to your plan. Lockheed Martin 401k participants get a 4% match if you put up to 8% of your salary in the plan. That’s a guaranteed 4% return even if you’re all in cash. If you can’t get to the 8% contribution, try to trim your budget to put in all you can. You can always build up to the full 8% over time.
Have you made any of the 401k mistakes above? That’s ok. For the most part, these are easily fixable going forward. The most important part is to spend the time talking with a professional for help. Your Lockheed Martin 401k is important!
If you have other questions about your 401k plan, feel free to shoot me an email at Brian@TheAeroAdvisor.com
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor intended as tax advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
