cant move 401k money out of company stock!

hi,

I'm sure many people are in this same boat and I feel that we need laws enacted to help us avoid the risks of this. I have about 40% of my entire 401k value in my own companys stock and I am not allowed to move this portion to the other investment options available. I called up the plan administrator and asked why I cannot move this money to other options and they said that I need to be at least 50 years old to be allowed to do so. (I'm 41).This makes no sense to me.Why do I have to be subjected to the risk of losing most of my 401k (along with my job) if the company shoud be run into the ground or if there is a big economic downturn like right now?

mykip,

I don't know, but to me, it sounds like a company policy where you can't move or touch the money until you are a certain age. I have a friend that works for a southern retailer, can't think of the name of hand, but you have to work there for like 5 or 6 years before you can even touch the money that's in their company stock. I know it must be painful and hopefully overtime it will go back upward. I personally wouldn't bail out of the stock (unless your company is financial problems), as I would see this as an opportunity to buy more stock at a discount. The Company I work for used to have their stock in the 401(k) Plan; however, decided only to allow investments in Company Stock through either Profit Sharing or Associate Stock Purchase, which gives us .15 match on the first $1,800...

Mykip,

You did not say, but it is my guess the company stock is the result of the employer matching funds. If that is the case, this employer stock is a no cost item to you.

The 401k plan rules are identified in the 401k Summary Plan, you should have had access to a copy when you signed on to the 401k plan. It would be beneficial for you to read the Summary Plan now. Also, you were right in questioning this rule. You may want to put it to the HR folks too, as the 401k administrator is following the rules of the plan.

It is probably a good idea for you not to invest your contributions into the employer stock.

With 40% of your 401k account balance in employer stock, either your other investments have taken a serious downturn, or the employer matching contribution is generous, and perhaps holding up under this recent market downturn.

Mykip,

I'm sure the Enron fiasco comes to mind. As far as I know, after all the brouhaha with congress and the press at the time, no laws have been voted or implemented by anyone so far.
Are those stocks common or preferred ?
Clydewolf is right, take a good look at your 401k plan rules.

I never recommend anyone to take their money out of their 401k before retirement. But, if you think that you may loose your money in 401k, then take it out if your company has no issues with it.

Just account for this in your asset allocation.

Decide on an optimum allocation (if world was perfect and you could own what you wanted in your 401k). Age 41 might be 80% stocks and 20% bonds, with 30% large cap, 10% small cap, 10% mid cap, 20% foreign large cap and 10% foreign small cap, with 15% diversified bonds and 5% cash.

If you work for a large cap company (member of S&P 500), take a portion from that allocation and move it to cash or bonds.

So the 401k adjusted allocation is:
20% large cap, 10% mid cap, 10% small cap, 20% foreign large, 10% foreign small, 25% bonds and 5% cash.

This is a 70-30 allocation. If this is not good enough, start taking 1% off each asset class and shifting to bonds (maybe 60-40 allocation)

If your normal age 41 allocation was 60-40, do the same thing, and shift to 40-60 within the 401k.

Two points-

1) I allocated each account (401k and IRA) the same. If one account is 80-20, the other account is 80-20 too. This way the risk within that one account is the same as the risk within the other account. Each account is easier to rebalance.
2) The only exception to this is Roth IRAs- I prefer to maximize growth with my Roth. I am 35 yo and my Roth will be 100% equities until I am close to withdrawing. To get more conservative in Roth I own more dividend paying stocks (they hold their value better than most other stock classes).