What SpaceX IPO could mean for your 401(k), according to this Philadelphia-area CFP

The stock market opens this week with major buzz around a historic IPO. SpaceX, Elon Musk's rocket company, started selling shares to the public for the first time Friday.

But even if you are not buying it directly, it could still impact your retirement savings. Some of those shares could wind up in 401(k)s and pensions within the next couple of weeks.

That is not typical, certified financial planner Regina McCann Hess says. Normally, it can take a year or more for a newly public company to be added to major index funds where millions of Americans invest their retirement savings. Those rules are meant to keep companies without a track record out of key funds tied to long-term investments.

This time, that timeline is moving faster.

Two major indexes, the Nasdaq and the Russell, are moving to include SpaceX sooner than usual. That has raised questions about how quickly exposure could reach retirement accounts.

McCann Hess has been hearing those concerns from clients.

"Nasdaq and Russell, their plan is to allow SpaceX into their indices," McCann Hess said. "Nasdaq is going to make them wait 15 days from public trading and Russell after five days."

But she says there is an important reality check for most investors. The S&P 500, where most retirement money sits, is not fast-tracking the company.

"The S&P 500 is the majority of the indexing in retirement plans. I'd say it's like 80 to 85% of that," she said. "They're making them wait that full year and follow some of the other rules that they have, so that's going to protect the majority of the retirement money in these 401k plans and 403b plans."

For people who take a "set it and forget it" approach to retirement saving, McCann Hess said exposure will likely remain limited.

Still, Hess says it is easy to get caught up in the excitement.

"Everybody's talking about it, I'm getting emails from people who would never even know about IPOs," she said.

But she cautions against making quick decisions based on headlines.

"It is exciting, but it's also not tried and true. It's very, very risky," Hess said. 

Her advice is to stay focused on long-term strategy.

"You have to really balance something like this out, whether or not you have the taste for it, or the risk tolerance for it," she said.

The bottom line for most investors is simple: Do not panic. Stick with a diversified plan. Keep long-term goals in focus.

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