More and more company 401(k) retirement plan sponsors are offering the SDBA account option. SDBA stands for a self-directed brokerage account. This account option is offers a brokerage account options within your existing company 401(k) retirement plan account.
The leading providers of company 401(k) SDBA options are the Schwab Personal Choice Retirement Account® (PCRA) and Fidelity BrokerageLink®.
This SDBA account option allows access to any many more investment options. Many of my existing individual company 401(k) investment advice clients own low-cost ETF’s (exchange traded funds) in their 401(k) SDBA accounts.
Working couples often own the same type of mutual funds in each of their individual company 401(k) retirement plan accounts. Overlapping annul mutual fund costs can be avoided with SDBA brokerage accounts.
The other huge benefit to the SDBA brokerage account option is the opportunity to improve the annual investment performance in your company 401(k) retirement plan account.
SDBA accounts allow for lower-cost and better-performing company 401(k) retirement plan options. You don’t have to settle for the default mutual fund options on your existing company 401(k) retirement plan account menu.
There also are transaction costs associated with an SDBA account. I have seen costs between $15 and $25 every time you buy or sell a security in an SDBA account. Annual fees range from $25 to $75 per year.
Even with the annual fees and the transaction costs, company 401(k) retirement plan SDBA accounts are worth the extra annual expense.
It is very important to know the limitations of your current company 401(k) retirement plan account. Take the time to look for the self-directed brokerage option in any company 401(k) retirement plan account in which you currently participate.
Ric Lager
Lager & Company, Inc.
