401K advice Needed?

Hello, I'm a 40 year old professional, with a wife and 2 year old son. The early years of my marriage, in particular the desire to keep my wife at home during the first years of our child's lives, have led us to empty out a 401K from a previous employer. I'm essentially starting over again with my new 401K. I'm also having to think about saving for my children's college education.

My current asset allocation in my new 401K is: 20% in an S&P500 index fund, 20% in a small cap growth fund, 20% in a large cap growth fund, 20% in a bond fund, 15% in an asset allocation fund, and 5% in a money market account.

Can you offer any tips/advice for getting my retirement savings where they need to be? Is my asset allocation strategy appropriate for my age? What % should I be contributing at this point in order to catch up? Thank you for any advice you can give.

You have an very specific situation that a financial advisor will have to work carefully with you in that your retirement and your son's college education are so close together.

As a point of reference as to your portfolio mix for retirement I just looked up the mix for Fidelity Freedom 2035 fund. This fund is designed to rebalance more conservative as the investors reach retirement age - targeted for people retiring in around the year 2035. It is unlikely this single fund is available in your 401K I used them simply as a professionally picked example of a portfolio mix. 66% U.S. equities, 16 % Non- US equities, 10% investment grade bonds, 7.5% High Yeild bonds, and .1% money market/other. (numbers rounded). Your portfolio listed above is actually really close to that already - super! Check to see if the Asset Allocation fund has some foreign exposure. If not, it may just be duplicating some of the other funds and could be changed over.

Next part is make your retirement budget: Start by figuring between 60 - 80% of your pre-retirement income in order to live in retirement. This income will likely come from 1) Social Security 2) Pensions 3) investment income/ savings and 4) IRA/ 401K proceeds.

You can request a statement from Social Security that will show your estimated benefit paid to you if you retire at age 65. That can go up if you work longer, and down if you file earlier - anyway, that plus if your wife is eligible for SSI, can be part of your income - if you are starting a new job now, the lieklyhood of a traditional pension is low, and in my opinion, any additional savings will go toward college for the little one.

So you will need enough in your 401K / IRA vehicles to get you to 60-80% of your pre-retirement income -minus - your expectations from Social Security.

Once you figure that out, figure that income figure is about 6 percent of the total that should be in that account on retirement day. Divide that by the amount of time you have left, (use a retirement calculator from online that can figure in the growth during your accumulation phase (there is one at Wachovia.com) and there lies the answer to your question above.

I'm wondering what your asset allocation fund is? I would assume it is a fund that automatically splits your investments between the different types of funds (large cap, small cap, etc.) based on your investment time horizon. If that's the case you're already doing that by splitting out into S&P, small cap, etc. No need to do that. I'd suggest talking with an investment professional who can allocate the %s properly.

You need exposure to international stocks and the asset allocation fund is probably overlapping your other stock and bond funds. I would have at least 25% in international stocks.