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 you’re probably going to need in the retirement years, which are going to be a lot later probably than you expected. You also shouldn’t be over-weighted in your company’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 didn’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 you’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 don’t even get the money; your company will take it out before you get the check. The other thing that’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 don’t pay income tax on. If you’re putting $15,000 of your income into a 401(k), you’re not paying $15,000 worth of income tax on that money. For many people, when they’re working they’re in a higher tax bracket than when they retire. [You’re] now getting $15,000 basically tax free toward your future.
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