All 401k’s and Profit Sharing Plans offer a money market account of some sort. We have all noticed, whether we are retail investors or 401k participants that money market accounts pay a pittance these days (averaging 0.2 to o.25%). However, there is a better alternative – one that is only available to qualified plans (401k’s, Profit Sharing Plans, etc.). Unfortunately, most plan sponsors (employers) are unaware of this alternative; either because they have not been presented with it or worse, the provider is not aware of this alternative. What is it you ask? These funds which are offered by a number of different providers are called Stable Value Funds. These money market alternatives are only available within 401k’s or Profit Sharing Plans and can yield up to 2%.
They carry daily liquidity and are most often guaranteed by the issuing company that they will maintain a stable value or in “money market speak”, they will not break the dollar. Not only do these stable value funds yield significantly more than comparable money market accounts, their yields are net of all fees. Money market account yields in 401k’s often do not quote their yields net of fees and as such often yield negative returns when the fees are included.
Granted, most participants are investing into the stock and bond fund choices in their 401k – but there are times when they may want to move a significant portion of their 401k assets to the sidelines. If there is an alternative to the money market account that yields almost ten times more and has the same relative safety, wouldn’t you want to have that choice in your 401k? If you would like to know more please call me at 760-755-7799 or email me at email@example.com to inquire further.