If you, like millions of other Americans, have worked for a publicly traded company for any length of time, chances are that at least a portion of your company retirement plan is invested in company stock. Over the years, the amount of stock in your plan has likely grown significantly in both the number of shares and the stock price. Of course, you do have other options you can diversify your plan into, but why should you? Your company’s stock is doing so well. You may not have much investment experience, but you do know your own company, and your superiors are telling you that the new products your company has coming down the pike are sure to give your plan balance another solid boost. However, while it can, of course, be motivating to hold company stock in your retirement plan, this strategy does pose some drawbacks. Some obvious examples of this are what happened to the employees at WorldCom and Enron, many of whom lost virtually all of their retirement savings in a matter of days or weeks. None of the employees whose savings were wiped out had diversified their savings adequately, and they suffered the consequences. “But that’s not me”, you respond. “I don’t have ALL of my money in company stock; I have at least a quarter of it invested in other things.” That’s good, but have you sat down lately and run any numbers on your plan to see what effect a sudden drop in the price of your stock would do to your financial well-being? For example, let’s say you have a hypothetical balance of $400,000 in your company plan and $250,000 of it is invested in company stock. If the stock is hypothetically trading at $45 a share, and then a breaking news investigation reveals that one of your major products is shown to be defective, then the price of the stock could, hypothetically speaking, easily drop to $30 a share or lower within a very short time. That would equate to a loss of over $80,000 or more in your retirement plan. While this would not likely bankrupt you, it could seriously affect your ability to live the life you want after you retire, or even force you to continue working longer than you had planned.