Don’t Bet the Farm on Company Stock

We all know better than to put a big chunk of our money in company stock, right? Wrong. After discovering that many employees had more than 20 percent of their 401(k) balances in its company stock plan, Washington Mutual is shaking things up. As of October 1, participants can't allocate more than 20 percent of their future salary contributions to the company stock fund, reports the Seattle Post-Intelligencer:

The memo notes that "several Fortune 500 companies believe that putting a cap on the amount of company stock in one's 401(k) is a smart way to reduce investment risk, and we have concluded likewise." One hopes WaMu employees came to that conclusion somewhat earlier, for the sake of their retirement accounts. WaMu's stock closed Friday at $4.05 a share, after posting a close as low as $3.23 in July. A year ago, WaMu was trading at $36.64 a share.

Nationwide, 36 percent of employees with 401(k)'s that offer company stock have more than 20 percent of their savings in company shares, according to a Financial Engines analysis. The stats for older workers are even more troubling: A quarter of plan participants over age 60 had at least half of their 401(k) in company stock. According to one retirement researcher (via USA Today), workers shouldn't put more than 10 percent of their savings in any single company stock—including their employer's.