When you start a new job, there are a lot of things to sort out. That’s not including what items you are going to decorate your cubicle with. Should I go with a life-size Darth Vader or mascot of my alma-mater? Besides those important decisions, you also decide on how to invest your retirement plan. But what are my Lockheed 401k investment options?

Before I jump in – I want to tell you that this post is not going to give you a recommended allocation. I can’t do that because everyone’s financial picture as well as how much rich they are comfortable with is different. I will however talk about your options and describe each one so you can make a selection that’s right for you. And if you need any help, feel free to reach out to me at Brian@TheAeroAdvisor.com or click the link on the bottom of this post.

What investments are available to me in my 401k?

There are basically two types of investments you can choose to invest in inside the 401k (I’m just going to call it that to simplify things, instead of the alphabet soup SSP, CAP, HSP, etc.). There are stock and bond funds and “other” funds.

Equity or stock funds typically invest a majority of the cash in those funds in stocks of individual companies. Each equity fund has a different investment objective or target allocation. Some of the stock funds are actively managed, meaning there is an investment manager doing research and deciding on the best companies to invest in. The other type of stock fund are index funds, which are passively managed. Passive funds don’t have an investment manager selecting investments, but aim to follow an index like the S&P 500. Bond funds are also available in your 401k and can include bond index funds (passively managed).

The “other” funds in the 401k plan lump a bunch of different options together. These funds include the Target Date funds, stable value funds and U.S. government securities.

Target date funds are what you were most likely invested in if you didn’t select an investment option when you started your 401k. Basically these funds invest in a wide range of stock and bond funds and adjust the percentages in each as you get closer to a retirement date. For example, if you select the “Target Date Fund 2030,” the investment mix will slowly get more conservative as the years get closer to 2030. These are usually assigned as your default investment option based on your birth date. You can however select a different fund if you’d like.

These target date funds are great if you would like to invest and diversify in a lot of different investments. The funds will also rebalance the investment mix for you to keep you aligned with the target allocation for each fund. These benefits do come with a cost, as the internal cost (the fees you don’t see on your statements) are a little higher than some of the other investment options in the Lockheed 401k.

The stable value fund is the most conservative investment option available and is the closest thing to investing your 401k in cash. However, this investment can go down in value, unlike your savings or checking account at the bank.

How should I invest my Lockheed 401k?

Like I mentioned earlier, I can’t tell you exactly what percentages you should invest every paycheck in. But to figure out how you should invest, you need to ask yourself a few questions:

How involved in the investment mix of my 401k do I want to be?

If you like doing research on the investments available, picking them out and rebalancing them on your own, you might be ok with selecting individual funds inside the 401k. The Summary Plan Description (or SPD – a 191 page document) is available to you if you want to dive down into all the performance, allocation and expense information on the plan. You can contact Empower to get a copy of this document.

If you want a more “hands-off” approach, the target date funds might be best for you. Just make sure you look into the allocations and are comfortable with them going forward. You can always select a more aggressive or conservative target date fund if you don’t like the one you are invested in initially.

How much risk am I comfortable with?

There are a few tools on the Empower website that will help you make sure you are ok with the risk of each of the investments available. You can also ask yourself how you reacted in 2008 when the market was in turmoil. Did you stick to your plan or make adjustments? You definitely want to make sure you are comfortable with the risk you are taking.

How long do I have until I’ll need to access my 401k funds?

Someone retiring in 5 years might want to be a little more conservative than the new hire that still has 40 years until they leave the workforce. But that’s another personal preference thing. Some investors might want to keep investing for the long term even in retirement, while others might not need that additional growth. Just make sure you have a plan for retirement income and your investments match that plan.

How you invest your 401k is unfortunately one of the decisions I see Lockheed employees spend the least amount of time with. If you need help with your 401k allocation, feel free to click on the link below. You’ll pick out a time that works in your schedule for us to do a free, 100% no-obligation phone call.

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The opinions voiced in this material are for general information only. They 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.