I am diversified but would like the money to be in more "cash". I am 3 years from retirement.
As the other advisors have mentioned, cash or a cash equivalent within your 401(k) plan may be a money market fund or a stable value fund. Be sure to review the terms of the stable value fund before selecting it as there may be time constraints on the holding period. Another option to consider may be the use of a target-date fund (a date appears in the name of the fund). Chose the year you want to retire then pick the fund the date closest to your target. These funds spread your 401(k) money across large company stocks, small company stocks, bonds and other asset classes, such as emerging markets stocks and real estate stocks. As you near the target date, the fund progressively becomes more conservative, owning less stock and more bonds. The goal is to reduce the risk you are taking as you near the date where you will need to use the 401(k) money. Just as with any investment, you need to do some homework first. All target date funds are not all created equal. You should consult with an experienced investment advisor to review your total financial picture and help you position your investments with retirement on the horizon.
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Sometimes, it can be difficult to determine which fund is a cash equivalent in a 401(k) account. A close approximation might be a "Stable Value Fund". According to the Stable Value Investment Association: All investments have risks associated with them. Stable value funds are considered one of the lowest risk investments offered in 401(k) plans. They have return stability similar to a money market fund but generate higher returns. Because of their low risk and stable, consistent returns they can help diversify 401(k) asset allocation. As an investor, you should evaluate your risk tolerance to make sure you are comfortable with the level of risk in your stable value fund and other 401(k) investments.
There are two types of "cash" that you can think about in this scenario. There's true cash, which is, in this case, probably a money market account, which will return you something just slightly over 0% interest. Then there's income-producing investments, which, for your 401k, is probably some sort of bond fund (long term or short term). The rule of thumb that I provide to clients who are not yet retired is that they should be 110 - age in equities (e.g, stocks) and the remainder in income generating investments. So, if you're 63, the rule of thumb would be 47% income and 53% equities. Sometimes people do 120 - age or 100 - age; it depends on your situation. Remember, those are rules of thumb! They should call them suggestions of thumb rather than rules of thumb! So, to answer your question, based on what you're envisioning, bonds are the answer.
All great answers above. As for the mechanics, contact your Human Resources Department or your plan provider.
Generally, you'll need to fill out a form, either online or on paper to have them move that portion of your assets to different classes. As stated above, many of the "cash" asset classes may have different names or descriptions, but most often they will be titled as "cash", "stable", "money market", or even "treasuries".
And, while you're at it, be sure to change your current and matching contributions to match your new allocation as well.
Rod Miller, CFP, CLU, ChFC
These are good answers given that you stated you want to move some of your funds to cash. You state you are retiring in 3 years. The amount you need to withdraw near-term needs to be safe, but recognize you likely need to retain an appropriate risky asset allocation.
Also be aware of interest rate risk in the bond funds offered in your plan. From my experience, 401k plans don't offer many choices beyond an "aggregate bond fund" and you won't likely have a 'long' vs. 'short' fund choice. Be aware aggregate bond funds typically have a duration around 5 which means if rates go up 1% the fund will lose approximately 5% in value. The other problem is the aggregate bond index has over 35% in treasury and government bonds and less than 25% in corporate bonds based on 1st quarter 2013 data.
Stable value funds have been mentioned and I concur they deserve a look. I am a fan of solid plans.