Every Minnesota company 401(k) retirement plan offers a default menu of mutual funds chosen by your employer and plan administrator. This menu of mutual funds is selected in order to limit the fiduciary liability issues for both parties.
Individual company 401(k) retirement plan participants may be both shocked and delighted to find that they have a self-directed brokerage option.
A self-directed brokerage account (SDBA) option opens the door to more mutual fund options. Most SDBA’s also allow for the purchase and sale of stocks, bonds, and exchanged-traded fund (ETF’s). The SDBA company 401(k) retirement plan account looks and feels just like your retail brokerage account.
It makes good sense to check to see if your current company 401(k) retirement plan account offers the SDBA option. The two most popular company 401(k) retirement plan SDBA accounts are the Charles Schwab PCRA account and the Fidelity Investments BrokerageLink account.
If you do a Google search, you can find numerous articles about the dangers of self-directing part of your company 401(k) retirement plan account. You can also find the same concerns about credit cards, home mortgages, and car insurance.
If you are reading this blog post, you are most likely a highly educated professional. You manage risks for your company and your career on a daily basis. I really don’t think that an expanded menu of company 401(k) retirement plan options is something that you can’t take on.
If you have the SDBA option, you have a decision to make. You need to make sure that if you open an SDBA account you are comfortable with the amount of time and experience necessary to self-directed part of your retirement plan assets.
Another option is to turn to an independent Registered Investment Advisor (RIA) for retirement account advice and insights on the investment management of your company 401(k) retirement plan SDBA account.
As with any company 401(k) retirement plan investing, take your time and read all of the disclosures and agreements. There are sure to be additional costs involved in your SDBA account.
The cost to open a company 401(k) retirement plan SDBA account is usually between $50 and $100. The costs per trade vary widely. I have seen $6.95 per trade all the way up to $35 per trade. I have also seen SDBA accounts with no fees at all.
Ric Lager
Lager & Company, Inc.
