There are a lot of things wrong with JPMorgan Chase's (NYSE: JPM) $2-per-share bid for Bear Stearns (NYSE: BSC), including increased government intervention in the marketplace, an increase in the moral hazard by the Fed assuming the riskiest assets, and the potential liability taxpayers face from allowing JPMorgan to virtually steal the choicest cuts of Bear's hide.

Yet while pundits will be questioning the rationale behind the maneuver for years to come, investors need to take away one important lesson from this debacle: Don't invest too much of your retirement nest egg into your company's stock.

We've heard that British billionaire Joseph Lewis has lost about $1 billion on Bear's implosion, and Chairman James Cayne, who owns around 5% of his company's shares, has lost about $400 million. But it's tough to feel too sorry for them. It's easy to imagine they'll land on their feet just fine after the smoke clears.

Pity instead the rank-and-file employees of Bear Stearns, who collectively own about a third of the company's stock. They've just witnessed the loss of their life savings. Dreams of homeownership, college for their kids, and early retirement have all flown out the window.

Rooting for the home team
Unfortunately, it's not a new phenomenon. After Enron collapsed in late 2000, a study looked at concentrations of employer stock within retirement plans. According to the study, nearly a full year after Enron, many company plans still had the vast majority of assets invested in employer stock. For instance, Procter & Gamble (NYSE: PG) employees had 94% of plan assets invested in P&G stock. Pfizer (NYSE: PFE) came in at more than 85%, while both Anheuser-Busch (NYSE: BUD) and Coca-Cola (NYSE: KO) were above 81%. In comparison, Enron's level was just 62% when its stock crashed.

Of course, there are no hard-and-fast rules for how much to put into your employer's shares, but if you limit your contribution to at most 10% of your total retirement funds, you're giving yourself enough exposure to benefit from any appreciation your company might enjoy while protecting your downside should it be your turn for the bear to eat you.

Striking out the side
When a stock is rising, it's easy to get caught up and think you should be putting more into it. It was only a year ago that Bear Stearns shares were trading at $150 a stub -- and just earlier this month that they were near $80.

Here are some alarming statistics from FINRA:

  • One-third of employees eligible to invest in company stock through their 401(k) have more than 20% in their company's stock.
  • Almost 9% of them have more than 80% invested in their employer.
  • For employees in their 60s, almost 20% hold half of their 401(k) savings in company stock.

How is it, though, that so many employees have such large stakes in their companies? For many workers, their 401(k) plan will be their biggest investment vehicle -- and since it's run through the company, investing in shares becomes easy. According to a study by Hewitt Associates, 23% of companies offering matching contributions do so in company stock. A 2006 study by the National Center for Employee Ownership found that 25 million Americans own employer stock through ESOPs, options, stock purchase plans, 401(k) plans, and other plans -- while 10.6 million hold stock options (often in addition to outright shares).

Foolish final thoughts
Protect yourself from becoming one of those employees who risk losing their life savings because they have too much tied up in their company's stock. You already count on your job to provide you with a paycheck to pay living expenses. Don't put your whole financial future in your employer's hands as well.

Take at look at where you're putting your money today, and take action now to reduce the risk to your future financial health. For other useful information on protecting your retirement, check out Motley Fool Rule Your Retirement free for 30 days.

Pfizer, Coke, and Anheuser-Busch are recommendations of Motley Fool Inside Value. Pfizer and JPMorgan Chase are Income Investor selections.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.