Retirement Savers Seek Safe Havens Within Their 401(K) Plans. They May Regret It Later

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Workers who traded 401(k) holdings in October pulled money from stocks and moved to fixed income. That may feel good now but likely means less money later.

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Target-date funds, the funds most popular with 401 plan investors, offer a mix of stocks and bonds that align with someone's expected retirement year . The mix becomes more conservative as retirement approaches. Selling stocks out of fear is like making a bad driving decision, said Philip Chao, principal and chief investment officer at Experiential Wealth in Cabin John, Maryland."I think most investors are reactionary, instead of acting in a purposeful, well-intentioned way," he added."And because of that, they tend to be all over the place when markets fall."This isn't to say there was a wholesale rush out of stocks for more conservative holdings.

 

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