Should I make more conservative investments in my company 401(K) if I'm going to leave the job in a couple of years?
My advice would be to invest in the 401k with the same type of funds you'd purchase when you rollover to your IRA. They are both retirement accounts. If the stock market tanks, your 401k balance will be low but you'll also be purchasing stocks at a much cheaper price when you establish your roth. You should create an asset allocation based on your age, not on the type of retirement account you have. One question to consider: When you do become a student, you'll likely be a in lower tax bracket. Can you contribute pre-tax dollars and then rollover to a ROTH in the year that you're a student? It doesn't make a difference if you will be keeping it in the 401K or transferring it to an IRA, it is still retirement money that you plan on investing for decades.  Pre-Enron many employees invested significant amounts of their retirement funds with the employer. One of the risks was that if a single stock was down at the wrong time, you were hurt if you needed to sell.  If you are going from an S&P 500 in the 401K to an S&P 500 in the IRA, it doesn't matter if the the market is up or down, the two funds will be pretty much in synch. "Your retirement PLAN is a lifelong plan and shouldn't be tied to your employer status. Max out your 401(k) contribution to the maximum that your employer matches (that's a 100% ROI!) and as much as you can afford. When you leave the work force rollover your 401(k) to an IRA account (e.g.: you can create an IRA account with any of the online brokerage firms Schwab, E-Trade, Sharebuilder, or go with a brick-and-mortar firm like JP Morgan, Stifel Nicolaus, etc.). You should have a plan: How much money do you need/month for your expenses? Accounting for inflation, how much is that going to be at retirement (whatever age you plan to retire)? How much money do you need to have so that 4.5% of that money will provide for your annual living expenses? That's your target retirement amount of savings. Now figure out how to get to that target. Rule #1 Invest early and invest often! The more money you can sock away early in your career the more time that money has to grow. If you aren't comfortable allocating your investments yourself then you could go with a Targeted Retirement Fund. These funds have a general ""date"" for retirement and the assets are allocated as appropriate for the amount of risk appropriate for the time to retirement."
The matching funds are free money, so it is a very good idea to take that money off the table.  Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k).  (Obviously, I'm keeping things simple.  Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k).  Typically, your options are more limited then in an IRA.  The cost of the 401(k) should be considered, as it isn't trivial for most.  (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs.  Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds.  Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture.  This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts.  Specific to your question, you have to consider the various types of investment vehicles available to you.  It is not just about 401(k) and IRA accounts.  You may also consider a straight brokerage account, a savings account, CDs, etc.  The costs and returns that you can typically expect are your guides through the available choices. "To begin, I'm not sure you understand what COL refers to.  It's what you spend, not what you bring in.  Let's say Bob makes 60k in some midwest town, but spends 30k for living.  If his salary and his cost of living both increase at the same rate, let's say they both double, this means Bob now makes 120k but spends 60k.  He now saves double what he would have before.  That 30k extra saved is 30k extra saved.  His purchasing power has now gone greatly up, especially in respect to housing outside of an expensive area like the valley.  For one, let me clear this up - SF, the city itself, is expensive.  I'm talking more generally about the bay area, and silicon valley as a whole.  Most tech jobs from the big tech companies that we think of as ""the bay"" are not in SF.  they are in mountain view, Sunnyvale, and that area.  So this might explain some of our disagreements.  Most people who work for large tech companies understand they have a decision to make - live in the city proper, pay a lot more than the greater valley, use transit into work (all of the giants have regular shuttles in), but get to love a more ""hip"" life, or be more conservative in the valley, where rental prices are on par with NYC.  In talking to a lot of people who work for the big companies, they know this.  Younger folks who want to live the city life pay the premium, but by far and wide they live outside of it, where it is closer to work, and they take the rail up for weekends out with buddies.  I'm still not sure where you are getting a doubling of the COL in the valley versus outside.  Yes, housing as a single item is going to be a person's largest expense.  But all the rest of their expenses are not going to see a similar increase.  It's also important to remember that saving 10% of 60 v 10% of 120 is significantly different.  Lots of people take jobs in the valley, are able to save vastly larger amounts of cash, and then leave.    In my calculations I evaluated the COL markup to be ~30% for the valley for a 200k job.  That is, I spend maybe 50k of my earning on all living expenses in the Midwest (in a downtown, nice area), and would expect I'd pay about 70k for the same standard in the valley.  But I'd be saving a shitton more.  I've done the math, I'm not here to argue with someone who just googled SF cost of living searching for the answers I want.  I've talked to actual people out there.  I appreciate your passion for this, but your 100% increase in COL estimate is simply wrong.  But then again, it depends on how you live and where you live in your current situation.  I live in a large midwest city, actually in the city itself." Rolling a 401(k) to an IRA should be your default best option. Rolling a 401(k) to another 401(k) is rarely the best option, but that does happen.  I've done it once when I started a job at a company that had a great 401(k) with a good selection of low-cost mutual funds. I rolled the 401(k) from one previous job in to this 401(k) to take advantage of it.  In all other cases, I rolled 401(k)s from previous jobs to my Rollover IRA, which gave me the most freedom of investment options. Finally, with 401(k)-to-Roth IRA rollovers, it's important to decouple two concepts so you can analyze it as a sum of two transactions: On my quarterly statement and the 401K plan website I can see the vesting for various categories. They total all these up and report the total balance and the vested balance. If I do the math I discover that the vested balance is equal to A + B + D + (60% of C) For my company at least, if I was to leave now I would get 60% of the Company match, which does include significant gains. This document for the Department of Labor discuss many aspects of 401K plans including vesting. In a defined contribution plan such as a 401(k) plan, you are always   100 percent vested in your own contributions to a plan, and in any   subsequent earnings from your contributions. However, in most defined   contribution plans you may have to work several years before you are   vested in the employer’s matching contributions. (There are   exceptions, such as the SIMPLE 401(k) and safe harbor 401(k), in which   you are immediately vested in all required employer contributions. You   also vest immediately in the SIMPLE IRA and the SEP.) Currently, employers have a choice of two different vesting schedules   for employer matching 401(k) contributions, which are shown in Table   2. Your employer may use a schedule in which employees are 100 percent vested in employer contributions after 3 years of service (cliff   vesting). Under graduated vesting, an employee must be at least 20   percent vested after 2 years, 40 percent after 3 years, 60 percent   after 4 years, 80 percent after 5 years, and 100 percent after 6   years. If your automatic enrollment 401(k) plan requires employer   contributions, you vest in those contributions after 2 years.   Automatic enrollment 401(k) plans with optional matching contributions   follow one of the vesting schedules noted above. There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants. You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls significantly on the very same day), and almost no exposure. This sums up to be a nice 1.5% yearly guaranteed bonus, on top of any other compensation. As to keeping the stocks, this depends on how much you believe in your company and expect the stocks to appreciate. Being employed and dependent on the company with your salary, I'd avoid investing in your company, as you're invested in it deeply as it is. "As others are saying, you want to be a bit wary of completely counting on a defined benefit pension plan to be fulfilling exactly the same promises during your retirement that it's making right now. But, if in fact you've ""won the game"" (for lack of a better term) and are sure you have enough to live comfortably in retirement for whatever definition of ""comfortably"" you choose, there are basically two reasonable approaches: Those are all reasonable approaches, and so it really comes down to what your risk tolerance is (a.k.a. ""Can I sleep comfortably at night without staying up worrying about my portfolio?""), what your goals for your money are (Just taking care of yourself? Trying to ""leave a legacy"" via charity or heirs or the like? Wanting a ""dream"" retirement traveling the world if possible but content to stay home if it's not?), and how confident you are in being able to calculate your ""needs"" in retirement and what your assets will truly be by then. You ask ""if it would be unwise at this stage of my life to create a portfolio that's too conservative"", but of course if it's ""too conservative"" then it would have been unwise. But I don't think it's unwise, at any stage of life, to create a portfolio that's ""conservative enough"". Only take risks if you have the need, ability, and willingness to do so." "the most important information that you provided was ""I'm 25 years old"". You have a few years to save for a rental property. Taking a loan against your 401k only invites a lot of paperwork and a good deal of risk. Not only the ""if I lose my job I have to pay it back (in 60 days)"", but it effectively locks you into your current job because changing jobs also causes the same repayment consequences. Do you really love your job that much that you would stick with it for the loan you have? (rhetorical) One could argue that real estate is a good way to diversify away from the stock market (assuming you have your 401k invested in stocks). Another way to get the same diversification is to invest in REITs through your 401k. Owning rental property isn't something to rush into. You really have to like it.The returns and headaches that accompany it can be a drag and it's harder to get out of then stocks."