The self-directed 401(k) account helps avoid the poor mutual funds that populate most 401(k) menus.
Go online or call your current company 401(k) retirement plan provider. Find out if you have a self-directed brokerage account (SDBA) option available. This “brokerage window” allows investments in mutual funds, exchange-traded funds (ETFs). Even and individual stocks and bonds.
Around 40 percent of employers offer self-directed brokerage account options. But only 3 to 4 percent of 401(k) participants with access to SDBAs use this self-directed option.
The main benefit of a self-directed 401(k) account is more investment options available to you. These investment options are a welcome alternative. too many 401(k) plans are full of high-cost and poor-performing mutual funds.
Many of the target date mutual funds found on default 401(k) menus have lagged. Their investment performance is not as consistent as lower-cost index mutual funds.
Lower-cost ETF’s (exchanged traded funds can reduce 401(k) annual costs. The same statement is true about the opportunity to improve annual investment returns.
Better annual investment performance. Lower annual costs. A self-directed 401(k) account opens the doors for each opportunity.
There are always better-performing and lower-cost investment alternatives for your 401(k). The self-directed brokerage account many times provides those investment options.
Take the time to find out if this self-directed option is available to your 401(k) retirement plan account.
Some 401(k) participants are hesitant. The myriad of self-directed brokerage account options can be overwhelming. The knowledge of an independent, third-party, fiduciary level investment advisor may be helpful.
It is important to understand the investment risks of a self-directed 401(k) account. There are always fees and expenses to consider.
Some 401(k) plans charge an annual maintenance fee for using the brokerage window. Find out if there are commissions and transaction costs associated with SDBA accounts. You can find that information online. Or in a quick conversation with your company 401(k) retirement plan provider help line.
In most cases, you will find a drop in annual mutual fund expenses. And many more 401(k) investment options outside your core company 401(k) mutual fund menu.
A 401(k) self-directed brokerage account may better suit your investment objectives. Lower your annual costs. Improve your investment performance. And lower your stock and bond market risk tolerance.
Ric Lager
Lager & Company, Inc.
