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A Scary Movie: Filling Your 401(k) With Company Stock

Employer stock in 401(k) plans is less common than it used to be, but it’s still in plenty of them.

According to Aon Hewitt’s 2013 survey data, 39 percent of employers offer their stock as an investment option. Among those companies, 12 percent go much further, requiring that the employer match of workers’ contributions from their paychecks be in company stock. Most let employees swap it for something else right away, but inertia often keeps them from doing so.

Some employers offer stock grants or bonuses as a form of extra compensation, and that’s fine. Others let employees gamble on their employer’s shares through an employee stock purchase plan that is separate from a 401(k), occasionally offering a small discount on the purchase. There, workers use discretionary money of their own if they so choose, and hey, if you want to turn your office into a trading floor, so be it.

But we’re talking about people’s golden years here — and trying not to tarnish them with enormous losses.

…The message of this and other movies like it is clear for employees: Don’t do this. If your employer matches your 401(k) contribution in company stock, set a calendar alert to remind yourself to sell it a few times each year and then reinvest it. If your employer restricts your ability to sell it right away and makes you keep it for a few years, complain loudly to human resources!

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