401k question

so, i was attempting to diversify my company’s 401k matching contributions, which are given as company common stock. i was told that i am not allowed to diversify any of my company’s matching amount until i have been here 5+ years. and at that point, i can only diversify 50% of the amount. i would have thought that i could diversify whatever money i have vested, since i always thought that vested meant that it was my money.

not that i think there is much chance of it happening, but basically i’m now stuck in the same position that the worldcom people were: 30% of my retirement money is in company stock and if that stock tanks, i’m screwed.

so, i think that this pretty much stinks. is this how all big companies work?

No, not mine

My wife is a manager for a really good company. Once she’s vested she can exchange company shares for other mutual funds in her 401K. Matching funds will still be in company shares but can be exchanged as they vest.

ya, that’s how i assumed it would work. the vested money is my money, dammit.

oh, and the other thing they do that is really annoying (and i just today realized why they do it…):

they don’t actually match you with real company stock. they match you will shares in a mutual fund that only contains company stock. so, basically, employees own a ton of company stock but don’t have any voting power, because the fund manager holds it all. nice. fuckers.

The only thing I can suggest is to drown out your employer’s matching contribution by contributing a greater percentage of your own salary. So, if they contribute 3%, contribute 17% of. Their stock then only makes up 15% of your portfolio.

For a couple of years, Motorola’s 401K plan has let employees allocate funds freely. The employer contribution is cash. If I don’t want Motorola stock, I don’t have to invest in it. And, if I have Motorola stock in my 401k portfolio, I can re-invest it into whatever else that’s available (different index funds, bonds, etc.)

That’s extraordinarily annoying; you’ve got enough risk exposure to the company going bankrupt. Never heard of anywhere doing this.

Edit: here’s a related paper.

http://www.ebri.org/pdfs/iscebs.pdf

Truly appalling. They need to bring it in line with the diversification regulations ons on defined benefit plans.

43 percent of those having a company stock investment option in the 401(k) plan reported that employer contributions were required to be invested in company stock.

Yeaaagh. WTF?

I suppose you could take a put option on an amount of company stock equivalent to what you’ve got in the 401k. I’d have to think about this more, but I think you could decrease the risk to index fund levels this way. Fucking annoying you have to pay for the right, though; not sure how much it’d cost.

wow, i wish i made enough to contribute 20%. i think i’m doing pretty good at 8%.

i’m single, so i don’t have the whole dual-income home advantage. and i also put something like 6% into a stock purchase plan, which nets me a little more discretionary income.

unfortunately, the put option isn’t an option for me. i don’t even own shares in the company, i own shares in a fund that owns shares in the company. even if i did own actual shares, it would cost about 10% of the value of the shares to protect them for the next 20 months, which doesn’t seem worth it to me.

thanks for the article. nice to know that i’m not the only one getting screwed by my company. maybe congress will do something about this. but i doubt it.

one thing that i found really surprising is that i don’t think many of my co-workers even realized they are getting screwed. i wandered around the office today, just asking people if they had ever tried to transfer the company matching money into a different fund, and no one ever had. i guess people like having 25% of their retirement money tied up in one single stock… like enron didn’t just happen a little while ago? hello?

It’s amazing how many people are totally clueless about their retirement funding, even at office jobs.

Dunno, can’t hurt to send an angry letter to your congressman and senator. It’s politically timely after Enron.

  1. Get your lawyer to write a firm letter to the fund manager indicating how they should let you invest your fully vested money as you wish.
  2. If you’re feeling bold contact your local tv station consumer spot so they can embarrass your company into good behaviour.

1 should work. 2 is only for those who feel they can get away with it.

You do. You just spend too much. :-)

I dunno. A lot of it probably has to do with my dad repeating two mantras for my entire teenage life: “live beneath your means” and “contribute as much as you can to your 401k and as soon as you can, or you will regret it when you are older.”

I wish my dad had contributed more to his 401k, cuz then he wouldn’t be living with me. No way I’m gonna visit that upon my own son, so max contribution it is. :-)