401k Concerns

Filed in Gather Money Essential by on July 31, 2007 0 Comments

I have some 401k concerns. On July 23, some of my co-workers were talking about a mailing they had received from our company’s benefits department regarding changes to our 401k plan. Apparently, 3 of the funds in our plan were being removed from the plan and we had until 4 p.m. today (July 31) to redirect future contributions to some other funds within the plan. Furthermore, we have until October 31 to redistribute remaining balances in those funds.

Personally, I didn’t receive any paperwork about this until Thursday (July 26) and I spoke to several co-workers today who STILL hadn’t received any information on this change. One of these people hadn’t even heard of any changes and was shocked that he only had until 4 p.m. to decide what to do with his contributions. I imagine many others in the company are on vacation and won’t find about this until the deadline has passed.

The motivation for this change is supposedly “poor performance” over the past 5 years. The company committee in charge of making these decisions wants to “minimize our risk” One of the funds in question is a stock market fund and is, admittedly, more risky than other investments. However, it seems to me, that just looking at 5 years worth of returns when discussing a stock market fund isn’t going to give a realistic picture of the funds performance. We’ve always been told that investing in this fund is for “the long haul” and with the expectation that, over time, it will outperform other funds.

My first reaction was to wonder about the legality – I would have thought there was some kind of regulations involving notification of this sort of change. My second reaction was to get rather angry.

My anger stems from the fact that A) we weren’t given hardly any notice and B) when dealing with this amount of MY money, I should be able to assume any amount of risk I’m comfortable with. I don’t want someone else (and nobody seems to know WHO is on this “committee” – how qualified are they to make these decisions?) telling me what’s acceptable risk and what isn’t.

I would close my account completely but don’t want to deal with the penalties I’d have to pay. I read somewhere that even if I rolled the money into an IRA, I’d get socked with a penalty unless my employment was to end with the company. Is this true?

I’ve tried to learn as much as I can about dealing with my money and, since my house is now paid for, was contributing 20 percent of my pay to my 401k. I’m so discouraged and disappointed that I’ve dropped the contribution back down to 3 percent (which is what the company matches) and plan to put the money into an investment vehicle of my own choice separate from the company’s 401k. But I’m not sure if I’m doing the right thing or if I’m letting my feelings get in the way of making a smart financial decision.


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