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Dave was well versed on real estate. He knew when to move and when to do that addition. He refinanced at the most opportune time, since he studied the interest rates daily. He did well financially with his homes over the years. Dave, as many Americans, has a majority of his net worth tied up in his home.
If the number one asset for most Americans such as Dave is their home, what is their second largest asset? Often it is their company retirement plan. This may be a 403(b), 457 plan, or SEP/SIMPLE IRA but frequently it is a 401(k) plan. Although he contributed enough to receive the employer match, Dave did not understand his investment choices. The employer match was in his company's stock, which had been performing poorly for years. Dave's contribution was directed into a money market fund that was paying a low yield.
With Dave trading up to more expensive homes, he now has a certain level of comfort to maintain in retirement. As he has no additional investments, the 401(k) will be required to fund Dave's retirement. Based on the retirement projections it was evident he would not be able to retire until age eighty given his current asset mix and level of savings.
It was important to diversify based on the selections available to him to reduce his risk. That, coupled with determining the level of savings required to meet his retirement objective, were important to getting Dave on track.
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