If you have been afraid to open your 401(k) statement for the past few months, now is the time. Open it. Read it.
While this is sound advice for everyone with a 401(k), it is critical for workers whose plans include a company-stock option. "In addition to tremendous exposure to company stock in their 401(k) plans, many people have stock options, so their financial security -- even their employment -- is all based on the success of one company," warns Mark Cortazzo, senior partner of the Macro Consulting financial-planning group, in Parsippany, N.J. "If there is a significant downturn in business, the value of the stock goes down, the equity of their options disappears, their retirement savings are decimated, and they could become unemployed."
Overdosing on employer stock seems to be an occupational hazard for employees of big firms. Company stock represents more than 40% of all assets in 401(k) plans with 5,000 or more participants, says David Wray, president of the Profit Sharing/401k Council of America. In smaller plans, it accounts for only about 9% of assets. About half the large companies that offer their own stock as a 401(k) investment option also use it to match employee contributions.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Although some firms restrict the ability of employees to sell shares received as matching contributions, you always have the right to sell company stock you purchased with your own money.
Remember that there are no tax consequences for sales inside a 401(k). If you decide you have too much company stock, you can sell your shares without worrying about capital-gains tax on any profits.
There are no hard-and-fast rules on how much company stock is too much. Some advisers think company stock should not constitute more than 10% of a 401(k) account. Dee Lee, a financial planner and author from Harvard, Mass., is more liberal. But, she says, "if you have more than 25%, that should be a red flag."
-
Are COVID Shots Still Covered By Medicare?Getting the new COVID-19 vaccine covered by Medicare isn't as easy this year as it was in the past. Here's what you need to know before you take a trip to your pharmacy.
-
How Digital Platforms Are Changing the Way You Invest in GoldInvesting in gold is easier than ever thanks to digital platforms. Learn how online tools are lowering costs, increasing transparency and making gold accessible to all investors.
-
Trump's Economic InterventionThe Kiplinger Letter What to Make of Washington's Increasingly Hands-On Approach to Big Business
-
AI Start-ups Are Rolling in CashThe Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
-
Kiplinger Special Report: Business Costs for 2026Economic Forecasts Fresh forecasts for 2026, to help you plan ahead and prepare a budget on a range of business costs, from Kiplinger's Letters team.
-
Trump-Era Regulations Will Broaden Access to CryptoThe Kiplinger Letter The president wants to make the U.S. the leader in digital assets.
-
Breaking China's Stranglehold on Rare Earth ElementsThe Letter China is using its near-monopoly on critical minerals to win trade concessions. Can the U.S. find alternate supplies?
-
America's Surprising Strengths in Manufacturing and ExportsThe Kiplinger Letter Despite common perceptions that the U.S. doesn't build things anymore, American factories are still hard at work. A special report from The Kiplinger Letter.
-
The Economic Impact of the US-China Trade War
The Letter The US-China trade war will impact US consumers and business. The decoupling process could be messy.
