Epperson: You also have to understand that in this market environment you have to be well-diversified. The idea that you can just be in stocks and bonds is not going to cut it anymore if you really want to achieve the growth that youâ€™re probably going to need in the retirement years, which are going to be a lot later probably than you expected. You also shouldnâ€™t be over-weighted in your companyâ€™s stock, which is what a lot of people do.
Young: A couple rules of thumb: Never have more than 5% in one particular stock. You want to have exposure in sectors. A lot of my clients were investment bankers. So, of course they knew financial stocks really well. But they didnâ€™t have exposure to pharmaceuticals, energy, consumer products. I recommend that when you think about diversification you want to have exposure to sectors and industries. The easiest way to do that generally is through a mutual fund as youâ€™re getting started.
BE: When you look at the numbers the reality is a lot of black women are not investing in a 401(k) plan at work. Why is it important for them to invest in their 401(k)?
Douglass: The benefit of a 401(k) is you can really put it on autopilot. You donâ€™t even get the money; your company will take it out before you get the check. The other thing thatâ€™s key about retirement planning is that you get an immediate tax benefit. So, money that you put in a qualified plan such as a 401(k) you donâ€™t pay income tax on. If youâ€™re putting $15,000 of your income into a 401(k), youâ€™re not paying $15,000 worth of income tax on that money. For many people, when theyâ€™re working theyâ€™re in a higher tax bracket than when they retire. [Youâ€™re] now getting $15,000 basically tax free toward your future.
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