401 Stable Value Funds
All 401 programs must have a "safe fund"....a money market fund or stable value fund. How safe are stable value funds today regarding: 1. Reliablity of the credit rating agencies re. the swap issuers, 2. Financial condition of the swap issuers, 3. Quality of mortgage backed and other securities bought by the Stable Value Fund and 4. Trustworthiness of the Stable Value Fund Managers? Thank you
Terry Says
Well, this is splitting hairs on safety -- though I can understand your concerns. Many years ago in a bear market, there were some concerns about the liquidity and quality of the assets in these stable value funds, which are basically insurance company contracts. Over the long run -- which your retirement plan is designed for -- there likely won't be any question about the viability of the assets, or the insurance companies that package them. But in a global financial crisis, this could become a headline issue again. Meanwhile, they are the "safest" assets in your 40l(k) plan if you want to take some money out of the stock market. And outside your 40l(k) plan you can buy Treasury bills directly from the U.S. government at www.TreasuryDirect.gov, in minimum amounts of $100 -- or use an insured money market deposit account at your bank, or a Treasury-bill-only money market mutual fund. These offer the absolute greatest degree of safety -- but you won't earn much interest these days!
