During this time of economic uncertainty in the United States economy there have been major declines in the U.S. housing and financial markets. Many individuals are concerned about their financial well being. This is a good time to evaluate your overall financial condition and safeguard your finances. One of the best places to start is by looking at your 401(k).

This is a great time to evaluate your risk exposure in your 401(k). According to the Financial Industry Regulatory Authority, “One-third of employees eligible to invest in company stock through their 401(k) have more than 20% in their company’s stock”. Are you overly concentrated in any particular asset class? Does your portfolio contain more than 20 percent of your own company stock? There are valuable lessons that can be learned from the Enron bankruptcy, Lehman Brothers crisis, Washington Mutual insolvency and the Bear Stearns failure. The old adage is right, “Don’t place all of your eggs in one basket”.

A large number of the employees of these firms lost their jobs and their life savings. A good rule of thumb to follow is to never invest greater than 20 percent of your money in your own company’s individual stock. You don’t want to lose both your job and retirement savings just because you placed too much trust in your company. Your only defense is diversification. Your 401(k) should contain a mixture of stock mutual funds, bonds mutual funds and cash to truly be considered diversified. Bond income and interest earned on cash savings can help generate positive returns when equity prices are declining.

A 401(k) is not a piggy bank. You should not use your 401(k) for credit card debt payments. It is your nest egg for when you are well into your golden years.