How much of company stock in 401(k)?

[v]

My new 401k has the option to include company stock. It is a solid company, the stock has had a lot of growth in the past years, and the leaders believe there is a lot of room for even more growth.

Under those circumstances, how much (if anything) of your 401k would you devote to company stock?

If it matters, I will be putting $50 a paycheck ($1300 a year -- which will buy me not even two shares!) into the employee stock purchase plan this year and may up that as time goes on. So I'll have non-retirement stock as well.

The rest of the 401k will be in a mix of large, mid, and small cap domestic index funds and an international index fund.

Thanks!

[gt7301b]

When I worked for a Fortune 500 company the only company stock I bought was with a discount through our ESPP. Even though it was a large, sound company I didn't like the idea of having my job and retirement dependent on a single company. This was also pretty close to Enron, so I may have been a little paranoid.

[changedname]

My first thought was Enron. One of my friend's h was one of those that lost a ton of his retirement working at Enron. He was in his twenties so not a huge deal but anyway.

I would put about what you are intending to and not much more.,

[CrazyLucky]

Our financial advisor is very much against putting a lot of your 401k into company stock. I currently have 1% in company stock. When I was at IBM, they offered a pretty good ESPP, and I used that fully, but had no IBM in my 401k.

[Deleted]

Suze Orman always says no more than 10%.

At $50 a check, I can't imagine you'll need to worry too much about the ratios as you have all your previous 401K money in other things.

[Pom]

I agree, that 10% is probably a good number.

That said, I just looked Mr. P has 14%.

Enron people were nuts but I guess someone had to be the cautionary tale. I am often curious what the 401k plans look like at EOG now regarding company stock.

[ladyk]

A lot of my dad's 401K got wiped out after 9/11 because of having too much in his own company stock. I wouldn't do more than 5-10%. I work at a bank and get the side-eye when I use the rival bank's debit card at the company cafe. I'm not the only one so I really don't care. To me it's the old adage about all of your eggs in one basket.

[iheartbanjos]

Probably none since I do not do single stock investing for retirement, or really hardly any of my investing*.

Does your company have a match? Do they match in stock?

What kind of discount do you get for your ESPP and how long do you have to hold before you can sell?

We get a 15% discount and have to hold 90 days, so many employees at my company buy and sell stock on a monthly bases for additional income. As long as the stock doesn't drop more than 15%, they make money.

*ETA: I do participate in the ESPP, but not as a long term investment strategy.  My company matches in stock, so I own quite a bit of company stock.

[savan]

We have maybe 5% and our company is a common household name that has been around for a very long time. It's not going to go under, but I didn't like the idea of having my retirement tied up in one stock.

[raangoli]

I do 5%; I had previously done more, but I reduced it in the past years.

[shaynaatl]

No more than 5-10% of your entire retirement portfolio. I think it's a mistake if you are just looking at your 401k in a vacuum. Most experts say you need to devise your asset allocation across your entire retirement portfolio, not just, say, your 401k only or your IRA only.

[v]

Jan 28, 2015 9:31:51 GMT -5 shaynaatl said:

No more than 5-10% of your entire retirement portfolio. I think it's a mistake if you are just looking at your 401k in a vacuum. Most experts say you need to devise your asset allocation across your entire retirement portfolio, not just, say, your 401k only or your IRA only.

This is a good point (and one that I hadn't thought of). I've been working (and maxing out my 401k) for 10 years already so it will take quite some time before my new 401k makes a dent in my overall retirement portfolio.

Also perhaps relevant -- after my first year I'll have company stock in my retirement account whether I want it or not, because my company will put 10% of my comp into matching/profit sharing, 1/3 of which will be company stock (the other 2/3 will match my normal election). But that won't kick in until next January, and I'm allowed to move the money out of stock if I want to -- that's just how it will initially be invested.

[jene]

Jan 28, 2015 9:26:33 GMT -5 raangoli said:

I do 5%; I had previously done more, but I reduced it in the past years.

Same

[njohnson1972]

0%. My employment/pay is already tied to my employer. That is a lot of exposure to the company already. I certainly don't want my retirement tied to them as well.

[protozoa]

I prefer to keep it to less than 5% of my total retirement portfolio.

[Deleted]

Jan 28, 2015 10:43:12 GMT -5 njohnson1972 said:

0%. My employment/pay is already tied to my employer. That is a lot of exposure to the company already. I certainly don't want my retirement tied to them as well.

This! Totally my opinion, too!

[Deleted]

None.

[FishChicks]

None for me. Like you, I have an ESPP and receive stock grants/options as long term compensation. The value of that is over 15% of my salary. Between that exposure and the fact that I rely on my employer for a paycheck, I don't want to tie up any more of my net worth in company stock.

[Poppy]

You get the ESPP at a discount so if you're going to allocate money to company stock, I'd increase that contribution.

My husband gets his match in company stock and we periodically sell it and reinvest in broad indexes. Personally, I prefer not to hold any individual stocks, much less that of the company I depend on for a salary (although when I had access to ESPP I maxed that out because FREE MONEY, then I sold that periodically as well).

[niq]

I'm in the zero percent camp. I've never worked anywhere where ESPP & 401k interacted.

When I had (non-tax-deferred) ESPP I tried to max out and sell immediately, because FREE MONEY.

[womet]

Jan 28, 2015 8:29:34 GMT -5 changedname said:

My first thought was Enron. One of my friend's h was one of those that lost a ton of his retirement working at Enron. He was in his twenties so not a huge deal but anyway.

I would put about what you are intending to and not much more.,

My FIL used to work for them and was smart enough to diversify his accounts. So he didn't lose everything when they went bust. But some of his friends weren't that smart and have nothing for retirement. So sad.

I like @songforyou 's suggestion of <10%.

[changedname]

Jan 28, 2015 14:51:18 GMT -5 womet said:

Jan 28, 2015 8:29:34 GMT -5 changedname said:

My first thought was Enron. One of my friend's h was one of those that lost a ton of his retirement working at Enron. He was in his twenties so not a huge deal but anyway.

I would put about what you are intending to and not much more.,

My FIL used to work for them and was smart enough to diversify his accounts. So he didn't lose everything when they went bust. But some of his friends weren't that smart and have nothing for retirement. So sad.

I like @songforyou 's suggestion of <10%.

Yes, it is sad for sure. The Smartest Men in the Room is one of my favourite films to watch - it's just crazy how it all happened.

[womet]

Jan 28, 2015 15:14:06 GMT -5 changedname said:

Jan 28, 2015 14:51:18 GMT -5 womet said:

My FIL used to work for them and was smart enough to diversify his accounts. So he didn't lose everything when they went bust. But some of his friends weren't that smart and have nothing for retirement. So sad.

I like @songforyou 's suggestion of <10%.

Yes, it is sad for sure. The Smartest Men in the Room is one of my favourite films to watch - it's just crazy how it all happened.

It is crazy. My mom went to high school with Lou Pai, the "invisible CEO" of Enron. She has nothing nice to say about him. 

[babsbunny]

If you would buy the individual stock out of your 401k, then do it within your 401k, otherwise don't. When you do start getting a match and bonus, remember to move the money out periodically. Suze says less than 10% because of people that get matches but never move the money and then lose a ton.

[cjeanette]

Enron.

Not more than 5%. Really it depends on how the stock fits into the overall allocation. Is it a large cap value or growth? Don't let it be your only asset in that category but a small portion

[WOT?*]

I keep mine at 2% max. I would never go over 10% and would be more comfortable at less than 5%.

[v]

Jan 28, 2015 20:24:43 GMT -5 cjeanette said:

Enron.

Not more than 5%. Really it depends on how the stock fits into the overall allocation. Is it a large cap value or growth? Don't let it be your only asset in that category but a small portion

It is mid cap -- just shy of large cap.

I will definitely keep my contribution percentage to less than 10%, but I have enough in my retirement savings at this point that at 10% contribution rate it would take a long time for the stock to be a large part of my savings (even more so if you count my husband's accounts as well).  I'm just wondering whether I should be contributing anything at all.

I do understand the Enron issue so I'd never, ever let it be a substantial part of our overall holdings, but it is a stock that I'd want to invest in even if I didn't work at the company (Motley Fool is extremely bullish about it) so I'm tempted to invest some in it.  But then -- Enron.  But then -- Facebook!

[mich1]

SO had about 25% of his total portfolio in company stock (it was doing REALLY well too) and sold off 15% to back off his total investment to 10%. Even that has him a little itchy.