Company Sponsored Retirement Plans

October 17, 2013

In our Free Report: What Every Christian Investor Needs to Knowwe thoroughly cover the fact that the Bible instructs us to avoid ill-gotten gains. However, if we participate in company sponsored retirement plans, such as 401k plans, we often give up some level of control over where our money is invested. This causes a dilemma for some of us. We want to avoid morally questionable investments, but we know that it would be very financially unwise to forego participating in our employer's retirement plan, especially in cases where there is a company match for employee contributions.

I cannot tell you what you should do in this situation. I can only tell you what I would do in the given situation, and that would be to do make a sincere but reasonable effort to avoid ill-gotten gains.

First, I would look for one or more morally sound investment options within the plan. Your company's retirement plan could very well have one or more funds which employ moral criteria when making investment decisions. You could further ask the plan administrator to provide you with the prospectus and the latest report for the fund. The prospectus should outline, at least generally, the moral criteria used when selecting investments. The latest report should show recent holdings of the fund, which will give you an idea of whether they are actually choosing investments with which you are comfortable. If so, the solution is simple. It may not be optimal in terms of having the power of choice, but at least your moral dilemma is solved for the time being.

Second, I would contact the Human Resources person within the company and advocate more employee control over where the money is invested. In other words, I would be an advocate for a very broad range of investment options, for reasons that go beyond the moral concerns. Many employer sponsored plans are very limited in their investment offerings. All else equal, more choices are preferable to fewer choices. There will likely be myriad objections and excuses as to why this is not the case, but at least I would have voiced my opinion. If many others follow suit, I may actually get results.

However, when it comes to the case in which there are no morals based options within the plan, I think I would be more likely to get results by voicing my concerns. Adding one or more morally screened funds is much more simple than revamping the entire plan. Further, there are likely to be other employees who strongly agree with my sentiments. I may be able to discuss this issue with my co-workers so that I'm not a lone voice crying in the wilderness.

If I were at the point of not having morally screened funds available, and the company effectively says, "Too bad, deal with it." The last option would be to research the funds that are offered more thoroughly. Even though they may not be marketed as morally screened funds, they may actually employ some kind of moral criteria. I would check the prospectus and latest reports. I would probably write a letter or email to the fund manager(s) telling him or her of my dilemma, and asking if the manager employs moral criteria when choosing investments. Often, you will find that they have some level of moral constraint in place. But you won't know until you ask.

In the end, if I could not find equity funds in my plan that had a reasonable moral component, I would simply choose a basket of index funds (until I had a better option). I would not consider withdrawing my participation in such a plan, if there was a company match or other benefit I would give up by withdrawing participation. That's because giving up company contributions toward my retirement, all else equal, would have serious, negative financial consequences. I've noted elsewhere that moral screening isn't about having a legalistic mindset. It's about making a reasonable effort to avoid evil and promote good with our investment activities.

However, there may be others who want to avoid stocks they see as sinful or wrong, pretty much at any cost. In that case, I still would not withdraw from participation in the plan. You can almost certainly find non-equity funds which give you no moral dilemmas, even if it is a money market fund or short term government bond fund. At least in that case, I would be taking the company match and hoping for better investment options to be offered by my company in the future. Further, if I were to ever leave the company, I could transfer the funds into an IRA, over which I could have complete investment control.

In the long run, settling for such options would not be financially optimal, at least from the perspective of man's wisdom. However, for me, principle should come before financial concerns, as long as it is within reason. Legalism is unnecessary and destructive. We don't want to become gnat strainers in regard to investments or anything else. But, I believe that God will recognize and bless the efforts of his people to put principle before profit (as long as they aren't falling into a trap of legalism). This is my personal take on the subject, and I am absolutely not advising anyone to take any particular course of action. Like everything else we may discuss here, the ultimate decision is up to the individual, based on their own level of understanding, moral convictions, and financial situation.

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