For boomers who may have lost up to one-quarter of the value of their 401(k)s, breaking even may be a major victory, but it isn't enough. CNN's Fortune Magazine outlined four ways you can help your clients take their 401(k)s above and beyond their pre-crash levels.
1. Rebalance portfolios. When the stock market tumbled in 2008, many pre-retirees had stock-heavy portfolios left over from the peak in 2007. After surge in share prices in 2009, your clients' asset allocations could be in similar danger. "The solution: Rebalance your 401(k) now, shifting money out of stocks and into fixed-income investments until you're back at your target weightings." Fortune also suggests focusing on subcategories of stocks, paying particular attention to small, midcap and foreign stocks, and betting more on blue chips.
2. Increase contributions. Clients approaching retirement should be contributing 10 percent to 15 percent of their pay, up to the 2010 limit of $16,500 (participants who are 50 or older can contribute an additional $5,500). "The higher bar is more reachable than you might think because the tax break you get on your contributions reduces your net outlay; investing an extra $6,000 a year, or $500 a month, costs you only $360 out of pocket if you're in the 28% bracket."
