I am going to make an educated guess here. I have seen enough Minnesota company retirement plan menus in my career to know that following statement is true.
The mutual fund options in your company 401(k) retirement plan menu are not very good. These mutual funds don’t perform well when the stock market goes up.
The costs of owning these mutual funds are too high. You should have the option of owning a wide range of less expensive exchange traded funds in your company 401(k) retirement plan account.
This spring, think about opening a self-directed account in your company 401(k) retirement plan brokerage window.
A self-directed brokerage account may be available in your company 401(k) retirement plan account. This is the same company 401(k) account that you already have. It is just another account option.
In a self-directed account, you can invest in many more investment options. You can buy 100 shares of IBM stock. You can own an exchange traded fund that owns all the best large cap pharmaceutical stocks.
The rules are different from plan to plan. Most of the company 401(k) retirement plans that I have reviewed in Minnesota allow for self-directed brokerage accounts.
There are costs associate with a self-directed brokerage account. There are annual fees to open the account. There are also fees to buy and sell stocks, mutual funds, and ETF’s.
These extra company 401(k) costs may be well worth it. If you have a self-directed brokerage account option in your company 401(k) retirement plan, you don’t have to put up with expensive and poor-performing mutual funds any longer.
The self-directed retirement plan account option takes more time to manage. This account also takes time to monitor. The trade off is the opportunity to improve your long-term investment performance in your company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
