Tips & AdvicePersonal FinanceWhat Are the Safest 401k Investments?

What Are the Safest 401k Investments?

A 401k plan is one of the most popular retirement savings vehicles available in the United States. A 401k, broadly, is a company-sponsored retirement plan. These plans provide certain tax benefits and, in many situations, also allow for employee matching. This means the more you can contribute to your 401k, the faster your retirement savings will grow.

Depending on your current employer and the structure of your 401k, you might be able to choose from several different options. In many cases, people creating a 401k will want to be risk-averse. After all, your retirement savings are likely not something you’d want to actively risk losing.

However, as most financial planners would agree, it is indeed possible to be too avoidant of risks. Retirement vehicles that contain extremely low interest rates—especially when inflation is higher—might end up causing you to lose your spending power as time goes on.

This creates a situation where you will need to carefully balance two goals: growing your retirement savings throughout your career and protecting these savings from future financial uncertainty. Luckily, there are many very safe ways to invest in your 401k, including stable value funds.

In this post, we will discuss how stable value funds can help you save for retirement, as well as the various things you should think about when crafting your 401k.

Things to Think About When Making a 401k Plan

When it comes to creating your 401k, there is no universal blueprint that will be best for everybody. In fact, before deciding which plan is right for you, there are a few important questions that you will need to ask yourself.

  • When do I hope to retire?
  • What is my current salary, and what do I expect my future salary might be?
  • Does my employer currently match my 401k contributions? Is there a limit to how they are willing to match?
  • What is my current family situation (spouse, kids, etc.)? Is this something I want—or expect—to change in the future?
  • What are the other components of my investment portfolio (stocks, bonds, real estate, annuities, etc.)?
  • What are my long-term financial goals?

 And, of course, you will also need to think about your personal level of risk tolerance. Generally speaking, people who are willing to take on more risks can expect their portfolios to grow faster. Still, there will also likely be situations in which they end up losing money, which can be intimidating to many people. 

This is why you might end up finding yourself in a situation where you are looking for a safe 401k investment plan that still has a reasonable amount of earning potential.

Stable Value Funds

Stable value funds are among the lowest-risk 401k plans that are currently available. These funds—which might also be called guaranteed investment contracts (GIC), fixed interest funds, and several other names—are typically used by people close to retirement and want to ensure that the wealth they’ve accumulated actually remains protected.

These funds are popular because they are structurally guaranteed to provide future payouts. Using contracts that are issued by a bank, an insurance company, or some other financial institution, a stable value fund promises to make specific payouts at a specific point in time.

These funds are somewhat similar to guaranteed annuity contracts, though they differ in the fact that they will be attached to a 401k. And though the actual returns you receive with the funds will be smaller than what you might get by investing in, say, an index fund, they are a great way to “lock in” your wealth and continue expanding your savings through contributions.

What Are Some Alternatives to Stable Value Funds?

Two of the most common 401k stable value funds alternatives include bond funds and mutual bonds. Bond funds also offer a (near) guaranteed return and payout schedule, but due to the structural nature of bonds, you might face certain liquidity issues. This means that if you want to access the savings in your bond funds before you’re the designated payout date, you may end up needing to pay a pre-determined fine.

Mutual funds are also a common alternative to stable value funds. Structurally, mutual funds are not necessarily risky. However, since most holders of mutual funds are expecting higher returns, a portion of these funds will usually be stored in risk-exposed savings vehicles, such as investments in the stock market. 

Who Should Invest in Stable Value Funds?

Overall, stable value funds make it possible to maintain the wealth you’ve built while still allowing you to have relatively easy access to your savings. Ultimately, this makes these funds among the best options for people trying to avoid any exposure to speculative risk. Due to relatively high inflation rates and increased stock market volatilities that have existed over the past few years, many people have considered adopting a more conservative approach to spending.

Generally speaking, due to their extremely low risk-reward ratio, stable value funds are most frequently used by people nearing their retirement. These individuals are not necessarily concerned with maximizing their wealth before they retire and are okay with accepting predictable payouts in the future. Their primary concern, rather, is making sure the wealth they have accumulated is locked in and still financially productive.


If you just recently opened a 401k, you might want to consider using a savings vehicle that is a little bit riskier (with higher potential for growth) than a stable value fund. However, these funds are, without a doubt, a great savings vehicle for people that are trying to just hold onto their hard-earned money. Consider speaking with a financial advisor and exploring several different options.

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