How to Invest Your 401(K) in Causes You Care About

My Two Cents Oct. 16, 2020  By Charlotte Cowles@charlottecowles

The Cut’s financial advice columnist Charlotte Cowles answers readers’ personal questions about personal finance. Email your money conundrums to mytwocents@nymag.com

Sustainable investing: One more thing to feel guilty about not doing? A luxury for rich people who want to justify the piles of money they’re making in the stock market while the rest of us fret about our jobs? Or a relatively painless action you can take with your retirement savings and then sleep better at night?

Technically, it’s all three. But let’s not overcomplicate things. The good news is that if you have a retirement account, it’s easier than ever to invest it in a way that reflects your values. I think of it as kind of like voting with your money, which is to say, it’s more effective than screaming into the void.

I know: Wading through the bowels of your 401(k) plan is the last thing you feel like doing these days. But in the grand scheme of joyless pandemic should-dos, moving your retirement investments into companies you feel vaguely good about — and divesting from the ones you definitely don’t — is not that unpleasant, especially if you’ve just spent an evening trying to scrub seven months’ worth of mysterious goo out of your refrigerator drawers.

From start to finish, transferring my retirement savings into ESG funds — named for the “environmental, social, and corporate governance” standards that they’re held to — took me less than an hour, including the eight minutes I spent on hold when I got confused and called the investor services line at Vanguard (they were very polite and talked me through the steps). I wouldn’t go so far as to call the process straightforward, but it was simpler than I expected.

(A word on retirement savings: Does it seem insane to focus on what your finances will look like in about 40 years when we’re in the middle of — gesturing around — all this? Of course. My advice: Don’t overthink it. Research shows that people make bad financial decisions when they get overwhelmed. If you’re already saving for retirement, keep doing it. If you’re not, make a plan for how to start.)

Here’s a step-by-step guide to better align your retirement savings with your moral compass.

What exactly are ESG funds?

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