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What does this mean?
Old 03-04-2021, 07:39 AM   #1
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What does this mean?

My company was just bought out, and the 401K was moved from Principal to Paychex. I was automatically enrolled in a year 2045 retirement plan. I want to rebalance to 100% S&P 500 ETF, and when I went to make the change, this notice popped up:

"100% Schwab S&P 500 Index
A purchase block will be placed on an American Fund if your redemption for that fund exceeds $5,000.00. The block will be in effect for 30 days unless another time period is specified in the fund's prospectus."

What does this mean? And my 401K balance that I will be rebalancing is greater than $5000.
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Old 03-04-2021, 08:02 AM   #2
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Quote:
Originally Posted by dirtbiker View Post
My company was just bought out, and the 401K was moved from Principal to Paychex. I was automatically enrolled in a year 2045 retirement plan. I want to rebalance to 100% S&P 500 ETF, and when I went to make the change, this notice popped up:

"100% Schwab S&P 500 Index
A purchase block will be placed on an American Fund if your redemption for that fund exceeds $5,000.00. The block will be in effect for 30 days unless another time period is specified in the fund's prospectus."

What does this mean? And my 401K balance that I will be rebalancing is greater than $5000.
What is the name of the 2045 Fund you are leaving? Is it named "American Funds 2045 or similar?

I would suspect this message is saying that you will be blocked from re-purchasing the 2045 fund again for 30 days since you are effectively selling it now (to buy into the S&P 500 Fund).

Sometimes mutual fund companies restrict selling and re-buying within a short time period to minimize chasing the market.
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Old 03-04-2021, 08:03 AM   #3
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Originally Posted by PaunchyPirate View Post
What is the name of the 2045 Fund you are leaving? Is it named "American Funds 2045 or similar?

I would suspect this message is saying that you will be blocked from re-purchasing the 2045 fund again for 30 days since you are effectively selling it now (to buy into the S&P 500 Fund).

Sometimes mutual fund companies restrict selling and re-buying within a short time period to minimize chasing the market.
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Old 03-04-2021, 08:10 AM   #4
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Yes, that's called a round-trip restriction. Very common with mutual funds.

Nothing for you to worry about, I think.
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Old 03-04-2021, 08:11 AM   #5
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Assuming that’s settled, it might be a good idea for the OP to start a thread discussing why they’re going from a balanced fund to 100% stocks. That’s a bit beyond “rebalancing”.
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Old 03-04-2021, 08:23 AM   #6
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Assuming that’s settled, it might be a good idea for the OP to start a thread discussing why they’re going from a balanced fund to 100% stocks. That’s a bit beyond “rebalancing”.
It sounds like his money was automatically placed in the 2045 fund when his employer switched to the new 401k administrator. They probably put everyone's money in a fund based on their age by default and then left it up to the employee to move it into desired funds if they want.
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Old 03-04-2021, 08:34 AM   #7
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Thank you everyone! That makes sense. Gotta love the quick replies I always get here in this forum.

Quote:
Originally Posted by Jerry1 View Post
Assuming that’s settled, it might be a good idea for the OP to start a thread discussing why they’re going from a balanced fund to 100% stocks. That’s a bit beyond “rebalancing”.
I'm getting back to 100% stocks. In the principal fund, I was 100% in an S&P 500 ETF. When they changed companies, I was automatically put into this one.
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Old 03-04-2021, 08:41 AM   #8
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Quote:
Originally Posted by dirtbiker View Post
My company was just bought out, and the 401K was moved from Principal to Paychex. I was automatically enrolled in a year 2045 retirement plan. I want to rebalance to 100% S&P 500 ETF, and when I went to make the change, this notice popped up:

"100% Schwab S&P 500 Index
A purchase block will be placed on an American Fund if your redemption for that fund exceeds $5,000.00. The block will be in effect for 30 days unless another time period is specified in the fund's prospectus."

What does this mean? And my 401K balance that I will be rebalancing is greater than $5000.
looks like it's a cooling-off period? I'd read your SPD or plan document
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Old 03-04-2021, 04:01 PM   #9
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Thank you everyone! That makes sense. Gotta love the quick replies I always get here in this forum.



I'm getting back to 100% stocks. In the principal fund, I was 100% in an S&P 500 ETF. When they changed companies, I was automatically put into this one.
That makes a lot more sense. Best to you.
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Old 03-04-2021, 06:39 PM   #10
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If the OP has a 24-year horizon until retirement, I see nothing wrong with being in the S&P 500, 100%. Still, some diversification might be warranted.
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