Quote:
Originally Posted by Thinking-man
Not that anyone should want to consider this option necessarily, but is it possible for someone to invest in 'cash' within their 401k? I know you can invest in "very safe" Bonds.....but is cash an option?
i know Vanguard allows you to keep your IRA money in cash and you still get to deduct the amount from your income for the year...effectively reducing your tax obligations (for now) with zero risk.
Can you do the same with 401k?
Can you do it with a company 401k?
can you do it with an individual business 401k?
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Yes.
But the only way the cash option makes sense is if you plan on actively managing the account, moving the funds into cash when the market starts a downturn and reinvesting in securities when it recovers. But I don't believe most plans will allow you to make changes often enough to really keep up with that.
As others have said, in the securities market you run the possible risk of losing principle, but with cash you have the guaranteed risk of losing spending power.
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