How to Kick SpaceX Out of Your 401(k) in 4 Steps (Before Elon Gets Your Money)

I get it. When I first heard the news, I felt the same way.

You've worked hard for your retirement savings. You've diligently contributed, month after month, trusting that your 401(k) would quietly grow into a nest egg for your future. You might have even chosen "responsible" funds, something broad, diversified, safe.

Then SpaceX went public. And overnight, millions of Americans discovered something unsettling.

They were already invested in Elon Musk's rocket company. Without ever choosing to.

I'm going to show you exactly how to kick SpaceX out of your 401(k). Step by step. Fund by fund. But first, let me explain how you ended up here in the first place.

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Here's Why You Might Be Investing in Elon Without Realizing It

Think of your 401(k) like a pre-packed suitcase. If you're investing in index funds, and most 401(k) plans default to them, you've essentially handed your luggage to someone else and said, "Pack whatever fits in the market."

Here's the catch. Index funds don't ask for your opinion on individual holdings.

They're designed to track specific benchmarks like the Nasdaq-100 or the Russell 1000. Whatever those benchmarks include, your index fund must buy. Fund managers don't get a vote. And that's where SpaceX came knocking.

The Index Rule Change That Changed Everything

For decades, index providers had sensible rules. Newly public companies had to wait, usually a year or more, before being added to major indexes. That "seasoning period" protected passive investors from IPO hype and volatility.

But for SpaceX? Wall Street made an exception.

• FTSE Russell altered its methodology to add megacap companies within five trading days of their IPO.
• Nasdaq cut its seasoning requirement for the Nasdaq-100 to just 15 trading days.
• CRSP followed suit, relaxing its own rules.

S&P Dow Jones initially held firm, stating that SpaceX would remain ineligible for the S&P 500 for at least a year due to profitability requirements. But here's the kicker: even the S&P opened a formal consultation in April 2026 exploring exceptions for megacap IPOs.

If you think these rules are carved in stone, think again.

Wait, I Already Own SpaceX?

Let me ask you something. Do you own the Baron Partners Fund? What about Fidelity Contrafund? If so, you already hold significant SpaceX exposure. Baron Partners holds SpaceX at roughly 37% of its assets. Fidelity Contrafund, one of the largest mutual funds in America, lists SpaceX as its fifth-biggest position.

And even if you don't own those actively-managed funds, your broad index funds are coming for SpaceX stock soon.

"If you're invested in a broad-based index fund that holds the entire stock market, you're going to be buying SpaceX, whether you like it or not," said James Angel, a finance professor at Georgetown University's McDonough School of Business.

That's not speculation. That's the rulebook.

How Much Exposure Are We Actually Talking?

Here's the silver lining. At least for now, the exposure is relatively small.

According to the New York Times, for every $50,000 you have in a total U.S. stock market index fund, your SpaceX holding would be approximately $57, roughly 0.1% of your portfolio. To put that in perspective, you'd own more than ten times as much Tesla stock as SpaceX.

Small, yes. But here's the thing about small exposures: they tend to grow.

Only about 5% of SpaceX's total shares will be publicly traded at first, which limits its initial index weight. As more shares unlock over time, that weight will increase. And if SpaceX's valuation continues climbing, on IPO day it closed above $2 trillion and made Musk the world's first trillionaire, that 0.1% could become 0.5% or more, fast.

Now, let me show you why "small" doesn't necessarily mean "safe."

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Why You'd Want to Kick SpaceX Out (Beyond Just Politics)

Look, I know some of you want to divest for political or ethical reasons. Elon Musk's increasing entanglement in government agencies, the environmental controversies around Starship launches, the political statements, those are valid reasons on their own.

But let's put politics aside for a moment and talk purely about money.

SpaceX might be the most hyped IPO in history. But hype doesn't pay dividends. And the numbers under the hood should make any prudent investor pause.

The Numbers Don't Lie

Here's what SpaceX disclosed in its S-1 filing.

The company generated $18.7 billion in revenue in 2025, a solid 33% increase from the prior year. Impressive, right?

Now look at the other side of the ledger.

SpaceX reported a net loss of $4.9 billion in 2025 and a staggering $4.94 billion net loss in Q1 2026 alone. The company's cumulative deficit since its founding now exceeds $41 billion.

What's driving the red ink? Two main culprits.

First, xAI, the AI division that includes X (formerly Twitter) and the Grok AI platform. SpaceX acquired xAI in February 2026, and the numbers are brutal. In 2025, the AI segment posted operating losses of $6.36 billion. In Q1 2026 alone, it lost another $2.47 billion.

Second, Starship development has consumed more than $15 billion in cumulative spending, with no commercial revenue yet to show for it.

Meanwhile, Starlink, the satellite internet business, is doing the heavy lifting. It generated $11.4 billion in revenue in 2025, about 61% of SpaceX's total. But even Starlink's profitability has pressure points. Average monthly revenue per user has dropped from $99 in 2023 to $66 in Q1 2026.

Jimmy Kimmel summed it up bluntly on his show: "SpaceX doesn't make money. It lost $5 billion last year. Typically, public companies that don't make a profit aren't automatically added to your 401(k). But SpaceX would be so gigantic at the IPO, the index would just have to take it."

He wasn't wrong.

The Uncomfortable Truth About Valuation

Here's where things get really interesting, and concerning for passive investors.

SpaceX targeted an IPO valuation between $1.75 trillion and $1.77 trillion. At that price, the company would trade at roughly 95 times its 2025 revenue.

To put that in perspective, Nvidia, a company with actual profits and AI dominance, trades at a far lower multiple. Even Tesla, Musk's other public company, went through a decade of losses before entering the S&P 500.

Morningstar's first fair-value estimate for SpaceX came in at $780 billion, less than half the IPO target. Aswath Damodaran, the renowned valuation expert at NYU, pegged fair value between $1.22 trillion and $1.35 trillion, still significantly below the IPO price.

What are investors paying for, exactly?

Dreams.

SpaceX's valuation is a narrative trade, not an earnings story. You're paying for optionality, the chance that Starlink captures more of global internet, that Starship transforms space logistics, that xAI becomes the next dominant AI platform. Those are plausible futures. But they're not guaranteed, and the current price leaves little margin for error.

And here's the kicker that few articles mention. SpaceX admitted in its SEC filing that profitability "may never occur". Those aren't my words. Those are the company's own words.

Government contract concentration adds another layer of risk. Roughly one-fifth of Starlink's revenue comes from contracts with NASA, the Space Force, and intelligence agencies. Policy changes, entirely possible as administrations shift, could jeopardize those revenue streams.

So yes, kicking SpaceX out of your 401(k) is about values. But it's also about not overpaying for hype when you don't have to.

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The 4-Step Playbook: How to Kick SpaceX Out of Your 401(k)

Alright. Enough background. Let's get to the part you actually came for.

Here's exactly what I did, what I recommend, and how you can follow the same blueprint.

Step 1: Audit Your Holdings

Before you change anything, you need to know what you currently own.

Start by logging into your 401(k) portal. Look for a "Fund Holdings" or "Portfolio Details" section. Most providers list the top ten holdings of each fund you're invested in.

Here's what you're looking for:

• Any total stock market index funds (VTI, VTSAX, FSKAX, SWTSX, or equivalents)
• Any Nasdaq-100 index funds (QQQ, QQQM, or similar)
• Any Russell 1000 index funds (IWB, VONE)
• Actively-managed funds like Baron Partners Fund or Fidelity Contrafund

If you see these in your lineup, you either already have SpaceX exposure or will get it soon.

Don't panic. Exposure isn't automatically a crisis. But it's information you need to act on.

Step 2: Exit the Danger Zone

Once you've identified the problematic funds, you have options. But here's a critical reality check first.

If your 401(k) plan has limited investment choices, and many do, you might not be able to avoid SpaceX entirely. That's an unfortunate fact. But let's focus on what you can control.

Within your 401(k), you can generally reallocate existing balances without tax penalties. You're just moving money from one fund to another within the same retirement account. No capital gains taxes. No early withdrawal penalties.

Which funds to consider selling:

• Total market index funds (VTI, VTSAX, equivalents)
• Broad market ETFs that track the CRSP US Total Market Index
• Russell 1000 or Russell 3000 index funds
• Any "Target Date" funds that hold these underlying indexes

The S&P 500 is your safest holdout, for now. The S&P Dow Jones Indices has publicly stated it will not fast-track SpaceX into the S&P 500, requiring the standard profitability seasoning period.

Step 3: Choose Safer Havens

Now for the constructive part. Where should you put your money?

Option A: S&P 500 index funds (VOO, SPY, FXAIX, SWPPX) These funds track the 500 largest U.S. companies. Since the S&P 500 requires four consecutive quarters of profitability for new entrants, SpaceX remains excluded for at least a year, potentially longer given its loss trajectory. This is the cleanest avoidance strategy available to most 401(k) investors.

Option B: Mid-cap and small-cap funds SpaceX is a megacap company. By definition, it won't appear in mid-cap or small-cap indexes. Shifting some allocation into funds tracking the S&P MidCap 400 or Russell 2000 completely bypasses SpaceX exposure while maintaining diversification.

Option C: International funds SpaceX is a U.S. company. International developed market funds or emerging market funds won't touch it. This is an option, though currency and geopolitical risks differ from domestic equities.

Option D: Actively-managed funds with transparency Some actively-managed funds explicitly disclose their holdings and have ESG mandates that could exclude SpaceX. Read the prospectus carefully before committing.

One financial analyst on social media offered this practical advice: "The first step is to dump any mutual funds that are tied to the QQQ, which is the symbol for the NASDAQ 100, or a fund that buys the whole stock market, like the Vanguard Total Income fund (VTI)."

Step 4: Set a Recurring Review

Here's the part most articles skip.

Index rules can change. S&P Dow Jones, which is currently holding the line on profitability requirements, opened a formal consultation in April 2026 to consider exceptions for megacap IPOs. If those rules change, your S&P 500 funds could eventually include SpaceX too.

Set a calendar reminder every six months to:

• Review your fund holdings
• Check for any index methodology changes
• Rebalance as needed

Proactive monitoring beats reactive panic every time.

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What If You Can't Change Your 401(k) Lineup?

I need to be honest with you here.

Some 401(k) plans offer a limited menu of funds. You might have only a few options: a target-date fund, a total market fund, an international fund, and a bond fund. If that's your reality, your ability to avoid SpaceX might be genuinely limited.

What you can still do:

• Maximize your IRA contributions. Outside your 401(k), you have complete control over your IRA investments. You can choose specific funds that avoid SpaceX entirely.
• Advocate for better plan options. Talk to your HR department or benefits administrator. Explain that you want more choice in fund selection. You might be surprised how receptive they are to reasonable requests.
• Accept the exposure and move on. If the exposure truly remains below 0.2% of your portfolio, ask yourself honestly: is the effort worth the impact? For some, yes. For others, no. There's no shame in either answer.

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Final Verdict: Is the Effort Worth It?

Let me level with you.

If your only concern is financial performance, the SpaceX exposure in your 401(k) is currently tiny. On a $100,000 portfolio, we're talking maybe $100 to $200 worth of SpaceX. That's not going to make or break your retirement.

But that's not the full story.

For many of you reading this, the decision to divest isn't purely financial. You don't want your hard-earned retirement savings funneled into a company whose CEO you distrust. You don't want to be forced into a speculative, unprofitable asset because index rules changed to accommodate hype. And you certainly don't want to wake up in five years wondering why 5% of your portfolio is tied up in a stock that never delivered on its promises.

Those are legitimate concerns.

Here's my bottom line: If avoiding SpaceX matters to you, for financial, ethical, or any other reasons, the steps above give you a clear path forward. Audit. Exit. Reallocate. Monitor.

The beauty of index investing is supposed to be simplicity and low cost, not forced ownership of companies you'd never choose.

You have the right to decide what's in your suitcase.

Now go pack it yourself.

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Hey, before you go

This article walked you through the full playbook, from why SpaceX landed in your 401(k) to exactly which funds to sell and which to buy instead. If there's a specific part you'd like me to go deeper on (like the exact ticker symbols for each fund type, or how to structure a "SpaceX-free" portfolio for taxable accounts), just let me know. I'm happy to build on this.