SpaceX may soon be in your 401(k)

Hi friends,

I have been trying to drink less caffeine and it is literally one of the hardest things I have ever done. I now fall asleep at like 9 p.m. and wake up ready for my first cup. Awful!

In today’s issue:
1. SpaceX may soon be in your 401(k)
2. A 4% rule update
3. On my radar

In a couple of days, your 401(k) could be invested in SpaceX, Elon Musk’s space rocket/satellite internet/social media(?)/artificial intelligence company that had the world’s largest IPO just two weeks ago.

That’s because Nasdaq waived its usual index inclusion rules for SpaceX, allowing it to bypass the index’s standard multi-month trading requirements. On July 7, SpaceX will join the ranks of the Nasdaq 100, the popular stock index that tracks 100 of the largest non-financial companies listed on the Nasdaq stock exchange. (Nasdaq is the name of a larger financial services company, a stock exchange, and an index fund.1)

As such, index funds and ETFs that track the Nasdaq 100 will be required to purchase shares of SpaceX to reflect the index’s new composition. That will trigger $4.3 billion in non-discretionary buying from passive funds, according to JP Morgan.

How does that affect your 401(k)? Well, most companies offer passively managed index funds like the Nasdaq 100 as investment options for their 401(k)s because they are considered safer investments than, say, picking random individual stocks. The company that manages your 401(k) has a fiduciary duty to act in your best interests when selecting investments—this is generally understood to mean low-cost, diversified, and not overly risky—and index funds are a way to fulfill this duty.

Index companies usually take that seriously, too. Nasdaq required a longer waiting period for stocks to be considered for inclusion in the Nasdaq 100, in part, to allow them to ride out some of the insane post-IPO volatility SpaceX has seen in recent days: the share price surged more than 60% after it debuted before correcting back down.

Notably, fellow index giant S&P resisted the pressure to change its rules, meaning SpaceX will not be fast-tracked into funds that track the S&P 500. Instead, S&P says it will be eligible after the standard one-year waiting period, pending SpaceX meets profitability requirements. As in, SpaceX will need to be profitable, which it is not.

Americans have more money invested for retirement in S&P 500 index funds than any other investment—well over $3 trillion. Meanwhile, prior research has found only around 1% of 401(k) assets are held in indexes tracking the Nasdaq 100.

The Russell 1000—another popular index—also changed its rules to include SpaceX more quickly.

One of the reasons given for the fast track inclusion is that the company is going to do so well that retail investors should be given a chance to get in immediately and ride the stock price up and up and up—even a few months’ delay is too much.

Not including SpaceX (and other companies planning potentially seismic IPOs like Anthropic and OpenAI) would actually mean the indexes don’t reflect the reality of the stock market like they should, some investors argue. If SpaceX is one of the biggest companies in the U.S. right now by market cap—and it’s currently #6, sandwiched between Amazon and Broadcom—then it should be included in index funds of the largest companies.2

There has been a big public outcry about the rule changes; that’s partly why S&P didn’t end up giving in and changing its requirements. But plenty of other people want in: retail investors reportedly bought $100 billion in shares at the IPO believing it’s literally and metaphorically the rocket they ride to the moon/Mars.

This isn’t the first time indexes have made special exceptions. When Saudi Aramco, the previous record holder for largest IPO, went public, it was also fast tracked into indexes, according to CNBC. Again, the thought is that these are the biggest companies in the world—they should be reflected in large cap indexes.

So the question now becomes: If you’re invested in funds that track the S&P 500, how do you feel about missing out on SpaceX for at least a year?

As long-time readers will know, Money Moves does not advocate for making big changes to your investments based on emotion. Especially with your 401(k) investments, you are thinking long term. So even if SpaceX stumbles in the next few years, theoretically that could be okay if it makes up for it later on. (Unless you’re on the verge of retirement, in which case you should be rebalancing your asset allocation anyway.)

I do have a hesitation here about the insane IPO price and subsequent share price that is still quite high, given SpaceX actually doesn’t make any money yet (many, many people think the company is overpriced to an absurd degree, given it has negative revenue). Passively-managed funds are going to be forced to buy at that inflated price; if it settles at something lower/more reflective of its actual revenues in the years to come, that’s not great for your retirement.

Speaking of revenue: SpaceX made $18.7 billion in 2025. Musk says the company “might be able to reach approximately” $1 trillion revenue in 2030. That’s four and a half years away. Does anyone actually believe that will happen? And does anyone actually believe this company is currently worth more than Meta, Walmart, and JP Morgan, all of which rank below it right now in terms of market cap? SpaceX is like Tesla in that the stock price is not based on what the company is actually producing, but rather is a bet on what investors think Musk will be able to do in the future. It’s very possible that the stock price falls down to earth if it turns out the emperor has no clothes.

Regardless, the optics now aren’t great in a time when people are increasingly angry about the rich running everything: it looks rather like the financial big boys gave preferential treatment to the richest man in the world, with only the nation’s retirement savings on the line. He’ll be fine if things don’t pan out; you and I, less so.

Share

Less relevant to our 401(k) discussion but interesting nonetheless3: Right after the IPO, Musk also led a $25 billion bond sale. That’s turning into a bit of a mess, with SpaceX bond prices dropping in recent days while yields rose 6%.

On the cash flow front: SpaceX posted a net loss of $4.9 billion on the $18.7 billion in revenues in 2025. Equity investors might be okay waiting for those data centers on Mars or whatever Musk is promising—according to the S1, passenger and cargo transport to the moon and Mars, asteroid mining, and extending “the light of consciousness to the stars”—decades from now, but bond investors are looking at the company’s actual performance today. SpaceX has a lot going for it, particularly Starlink, but nothing that screams “sixth largest company in the U.S.”

Bonds are admittedly a bit outside my normal coverage comfort zone, so I’m open to learning more about this. Drop me a line if you want to chat!

The 4% rule is a popular shorthand for retirement decumulation, or spending down your assets: Withdraw 4% of your portfolio the first year of retirement, then adjust that amount for inflation every year after that. Do this, and you’ll (likely) be fine, with your investment gains hopefully outweighing your spending and inflation’s sting.

As with everything else in life, exactly what works for you and your individual circumstances will not always work for me and my individual circumstances; tweaks to the rule have always been encouraged. But generally speaking, retirees have been advised to follow the 4% rule to avoid running out of savings when they left the workforce for the past couple decades.

The Wall Street Journal reports: No more! We all need more sophisticated guidelines in this day and age.

I’ll be honest, I probably wouldn’t have brought this up now at all had I not seen the Journal’s article—this discussion has been happening for years in retirement circles.

I for one am not a fan of rigidity in any aspect of personal finance—everything is so variable and dependent on personal circumstances that there’s always a million caveats that need to be added to every “rule.”

But I think sometimes my tendency to take a squishier approach to these personal finance axioms has negative consequences. As I’ve written about these topics for more and more years and spoken to ever more people about their finances, I have started to come around to the belief that some of us just do need strict rules to follow. It’s easier for our brains, it gives us a specific goal to hit, and it eliminates complexity that can be overwhelming. Rules like this are useful as a starting point, an accessible entry way that we can all modify to our own needs and circumstances.

Share Money Moves

But I don’t disagree with the Journal that the 4% rule doesn’t work for everyone. If you have spent decades building up your assets, trying to limit taxes, learning about stocks and bonds and alts, then you owe it to yourself to put in some additional time thinking seriously about your decumulation strategy. Because what’s the point of all the money if you don’t know how to spend it?

I do think this is the next big frontier in personal finance coverage. We’ve spent a long time publishing advice and insight into accumulating—now it’s time to focus on different strategies for spending it down.

• Books: I finished Belle Burden’s Strangers last week. There were many times I wanted to stop reading it because it was making me so mad, but I soldiered on. The discourse has mostly moved on but…I have many thoughts if anyone wants to discuss.

• JP Morgan succession woes: Back when I worked on the Most Powerful Women in Business list/newsletter at Fortune, the succession race at JPM was a big deal: Two women were always, supposedly, at the top of the list, each vying to replace Jamie Dimon whenever he decides to step aside. Well, not anymore! Dimon’s successor is definitely going to be a dude. Not exactly surprising: To this day, Jane Fraser at Citi is the only woman to climb the ranks at a Wall Street firm. Does any of this actually matter? Idk.

• Music: I am but a simple girl and am enjoying Olivia Rodrigo’s new album, particularly the run of “purple” → “the cure” → “begged” → “what’s wrong with me.”

• Recipes: This creamy cashew chicken salad was one of NYT Cooking’s most popular recipes last week, and since I happened to have cashew butter and a head of cabbage from our CSA on hand, I decided to make it. Really good! Perfect for the heat we’ve been having—and a perfect vehicle to eat a lot of my favorite herb, dill. Also a perfect way to use up the cabbage!

• TikTok: Here’s me talking about estate planning and beneficiary designations.

That’s it for now. See ya soon,
A

P.S. Thanks Christopher Skinner for the illustrations!