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Should I put all my 401(k) money in a safe place?

If you have heard good things about Stable Value Funds (SVF), you've heard right. You can make 3% more with SVFs. With 68% of savers now seeking safe investments, people have been moving their money into SVFs in record numbers. In fact, nearly 25% of all 401(k) money is now invested in SVFs, which invest in high-quality bonds and guaranteed IOUs from businesses like banks and insurance companies. And there are two good reasons to consider them:

1. You'll never lose any money you put in.
Unlike bond funds, the interest you'll earn is fixed, so your money is always safe.

2. You'll earn higher returns than with a money market.
The average money market mutual fund earned about 1% this year, but SVFs earned almost 3% more!

The Downside?
Your 401(k) plan may not allow you to transfer money from an SVF to any other fund, or it may restrict how often you can move your money.

So how do you get one?
You can't open an SVF as a regular mutual fund account, but two-thirds of employer sponsored retirement plans (like 401(k)s and a growing number of IRA mutual fund accounts now offer them. You can move any savings you've got in a money market fund or bond fund into an SVF, but keep the rest in stocks so your portfolio doesn't become too conservative. Then start making contributions to your SVF. How much? That depends on your age and risk tolerance, but as a general rule, put a small amount, say 10%, in this safe investment when you're younger and gradually move more into it as you get older.

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