Employees of Countrywide Mortgage are suing the company because of significant losses incurred due to the company’s financial troubles, and the fact that news of those financial troubles were kept from employees investing in company stock through their retirement accounts. The lawsuit cites that investors have lost a significant amount of the value of their retirement savings because Countrywide officials either inadvertently or intentionally did not warn investors of the company’s financial difficulties.

As sad as this is for the employees, this is the exact reason that people shouldn’t invest a majority of their retirement funds in any one company or stock. Enron is the leading example of a retirement investing “don’t” and it’s shaping up like Countrywide could be another. Investing in your own company is attractive, and the company makes it doubly so by stock purchase plans, easy payroll deductions, and an on-going low-level propaganda campaign touting how good the company is. Too many people sink entire life savings into company stock, only to find that the company suddenly loses value.

Investing should take risk into account as well as returns. Riskier investments have higher returns, but can also have higher losses. For retirement accounts, risk should be a factor in how investments are chosen.

• 20’s and 30’s – People are early in their careers, making less than they will make later on, but are in a perfect position to put away money that will be the lion’s share of their ending retirement funds. This age group can max out the IRA’s, 401k’s, 403b’s etc, and take some more risk than their older compatriots. Losses here can be recovered in later years.

• 40’s - People are in mid-late career and are generally earning the most they will in their lives by this time. Prudent investors scale back on the risk by re-balancing their accounts and moving some of their money to less risky investments. Don’t move too much, as there’s still a significant amount of time until retirement and you want your money to still work hard for you, but losses at this point will be harder to make up later.

• 50’s and 60’s – People in this range are looking more toward retirement and activities post-work. Gradually move funds from risky investments to less risky or non-risky investments.

• Retirement Years – At this point, risk is virtually intolerable. There is no time to recover from losses, and you are using current funds for living. All investments should be in as stable and risk adverse investments as possible.

Putting all your eggs in one basket by buying only company stock is very risky. Tempering your judgment on retirement funds by spreading the risk can lead to a much more comfortable life later on.

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