Non-stock 401K Options

[arminnie]

Does your 401K have an option to invest money in something other than stock?

I ask because I've heard so many people refer to their 401K account performance as being tied to the stock market.

My 401K plans have always had a "short-term" investment option (or even t-bills in the olden days) that is pretty much like a savings account. The rate is about 4% now.

I never was forced to invest a penny in stock - even the company's matching portion. Do you have that option?

 

[Christine]

Does your 401K have an option to invest money in something other than stock?

I ask because I've heard so many people refer to their 401K account performance as being tied to the stock market.

My 401K plans have always had a "short-term" investment option (or even t-bills in the olden days) that is pretty much like a savings account. The rate is about 4% now.

I never was forced to invest a penny in stock - even the company's matching portion. Do you have that option?

Yes, I have the option, but I also read just last week that the t-bills aren't the way to go. Wish I could remember the reason.

 

[AlexTina]

Ours has an interest income fund and some bonds.

Tina

 

[Cheshire Figment]

I have about M$1/3 in mine, all in Treasuries.

 

[Charade]

Ours has an interest income fund and some bonds.

Tina

My company one has that too. It has lots of options.

 

[DISUNC]

Yes, I have the option, but I also read just last week that the t-bills aren't the way to go. Wish I could remember the reason.

Cause they are based on the Treasury just printing $, without the gold to back it up.

Suzie Ormand was telling everyone to INVEST in T-Bills. All other Financial gurus were saying NOWAY! It is all very confusing.

 

[manning]

I can't swear if this is true, but I believe a few years ago a law or rule was passed requiring 401-k funds to offer a broad range of choices.

 

[Christine]

Cause they are based on the Treasury just printing $, without the gold to back it up.

Suzie Ormand was telling everyone to INVEST in T-Bills. All other Financial gurus were saying NOWAY! It is all very confusing.

Now, that you mention it, I *think* it was Suze Orman just last week who was the one that said "NO" to T-Bills. She was telling everyone to keep their money parked in the 401K stock funds they were currently in and to ride it out for a few years. Yep, I'm sure it was her. Maybe she's changed her mind?

 

[arminnie]

Thanks for the responses.

I've heard so many people say that they were going to take everything out of their 401ks or quit putting anything more in because the stock market was tanking. I can understand not wanting to be in the stock market (although this is not the time to sell in my opinion).

Because there were no tax consequences to trading in a 401k - I cashed out of the stock market more than once when I felt it was artificially high. I did it right before the dot com bust even though I had not specifically invested in that market. I did NOT cash out my 401k - just sold the stock and put it in the "savings" fund.

I know that Enron did put some restrictions on selling their matching stock, but I haven't heard of anyone else doing that.

 

[dvcgirl]

Thanks for the responses.

I've heard so many people say that they were going to take everything out of their 401ks or quit putting anything more in because the stock market was tanking. I can understand not wanting to be in the stock market (although this is not the time to sell in my opinion).

Because there were no tax consequences to trading in a 401k - I cashed out of the stock market more than once when I felt it was artificially high. I did it right before the dot com bust even though I had not specifically invested in that market. I did NOT cash out my 401k - just sold the stock and put it in the "savings" fund.

I know that Enron did put some restrictions on selling their matching stock, but I haven't heard of anyone else doing that.

Both DH and I moved our 401Ks out of stocks and into the "cash" alternative in our 401ks....money market funds last November. We were very concerned, and now we're thrilled that we moved it nearly a year ago. Our strategy became more about capital preservation instead of capital appreciation. We're still in that 100% cash position......and watching closely.

I agree with you though....if you've been in this long, stay in.

 

[Kathi OD]

We have non-stock options also. The problem is they are all losing money too.
So is it better to ride the big highs and lows with the stock options, just stay in the non-stocks, or go back-and-forth?

I doubt many average Americans are capable of reading the market trends well enough to do the back-and-forth option. JMO

 

[RitaE]

We have one fund that is called a Liquid Asset Fund, it is basically a money market fund. This option is traditionally utilized by persons in the withdrawal phase of their 401k, but is starting to be taken advantage of by more and more younger persons that are spooked by the market.

I talk to many people who do not realize that stocks are not the only option their 401ks offer. They say that want to "cash out" and move into a savings account at their bank, not realizing that they can put the money into cash within the 401k and avoid the associated taxes and penalties.

There are also 3 or 4 Stable Value fund options with various types of bonds or government securities offered with our 401k. Most 401ks do not have as many options as ours, but I've never seen one that doesn't offer some risk averse funds.

 

[arminnie]

I talk to many people who do not realize that stocks are not the only option their 401ks offer. They say that want to "cash out" and move into a savings account at their bank, not realizing that they can put the money into cash within the 401k and avoid the associated taxes and penalties.

There are also 3 or 4 Stable Value fund options with various types of bonds or government securities offered with our 401k. Most 401ks do not have as many options as ours, but I've never seen one that doesn't offer some risk averse funds.

That's what I was afraid of.

We have non-stock options also. The problem is they are all losing money too.
So is it better to ride the big highs and lows with the stock options, just stay in the non-stocks, or go back-and-forth?

I doubt many average Americans are capable of reading the market trends well enough to do the back-and-forth option. JMO

I agree. I've done it for myself a few times - but would never advise anyone else to follow me. I've been right most of the time but certainly not 100%.

I've usually done a mix. Even as a retiree I do not have everything in liquid assets - but I do have enough to live for at least 5 years without selling stock.

I loved this quote I heard a woman on tv say:
"No one ever lost money by taking a profit." If the stock is really that great long-term you can buy back in.

 

[golfgal]

Does your 401K have an option to invest money in something other than stock?

I ask because I've heard so many people refer to their 401K account performance as being tied to the stock market.

My 401K plans have always had a "short-term" investment option (or even t-bills in the olden days) that is pretty much like a savings account. The rate is about 4% now.

I never was forced to invest a penny in stock - even the company's matching portion. Do you have that option?

Ok, so you are getting 4% on your 401K, inflation rate is 5.8%, you lost money doing that.

Now, that you mention it, I *think* it was Suze Orman just last week who was the one that said "NO" to T-Bills. She was telling everyone to keep their money parked in the 401K stock funds they were currently in and to ride it out for a few years. Yep, I'm sure it was her. Maybe she's changed her mind?

For those that moved into the fixed rate funds you also lost the opportunity to BUY last Monday when the market set a record. In 2001 the market tanked and we lost a LOT more in our funds then but we are WAY better off now for leaving our money there because we were still in the market when it rebounded and had more buying power, thus ended up with a LOT more then we would have.

 

[arminnie]

Ok, so you are getting 4% on your 401K, inflation rate is 5.8%, you lost money doing that.



For those that moved into the fixed rate funds you also lost the opportunity to BUY last Monday when the market set a record. In 2001 the market tanked and we lost a LOT more in our funds then but we are WAY better off now for leaving our money there because we were still in the market when it rebounded and had more buying power, thus ended up with a LOT more then we would have.

True - hindsight is always perfect. Plus some luck. I sold a house in No. California 2 weeks after 9/11 and invested the money in a very down market. Was it a smart decision? Really it was more of lucky timing.

But NO ONE really can predict even what will happen on any given day or even a given hour. I wouldn't leave money in a savings account for decades - but my dad (87) has. It's his money so his choice not mine.

If you are years away from using the money then plop it wherever you want to and leave it. And if you happen to sell it all off when things are very high and then buy back in when they are low more power to you. (I've actually done that a few times).

But it is still risky to have money that you KNOW you will need shortly (house down payment, college expenses, new car, retirement living expenses) in the stock market. Ask anyone who HAD to sell when the market was so down.

But my real point of this thread is that if people DO want to get out of stocks they don't have to get out of their 401K.