Self-Directed vs. Employer-Sponsored 401(k)s

Presented by Marc Aarons

Today, I wanted to bring your attention to a topic that I believe is critical to your retirement planning: your 401(k) account.

As you may know, many employer-sponsored 401(k) plans have limited investment options, and the plan sponsor makes the investment decisions, not you. As a result, you may find yourself wanting more flexibility to choose investments that align with your financial goals and risk tolerance. Plus, if you change jobs every 4.1 years on average, like most Americans, it can be a hassle to keep switching retirement plans.

The good news is there is an alternative to an employer-sponsored 401(k) that may maximize your retirement savings and give you the freedom to choose your investments—a self-directed 401(k) brokerage account with guidance from a registered investment advisor.

Here is more about this type of 401(k) and why it may make sense for you:

1. A self-directed 401(k) provides you with more investment options. With a self-directed 401(k) account, you can invest in a more diverse range of investments than typically offered by employer-sponsored plans, such as individual stocks and bonds, exchange-traded funds, and many other mutual fund options.
2. An RIA can help you make wise investment decisions. If you’re not experienced in investment management, an RIA can provide personalized attention and guidance to help you manage your self-directed 401(k) account effectively.
3. Working with an RIA may be more cost-effective. Most employer-sponsored 401(k) plans charge fees without providing personalized guidance. By contrast, an RIA can be a more cost-effective option. In fact, according to a study published by Vanguard in July 2022, professional advisers can increase the value of your assets by 3% annually. Plus, an RIA can develop a comprehensive financial plan that considers all your investment accounts, not just your 401(k) account.
4. An RIA works to understand your personal risk tolerance and design an investment portfolio that aligns with your unique financial goals. This ensures you avoid the pitfalls of being overconcentrated in any one investment or asset class.

I want you to have the tools you need to achieve your financial goals, and a self-directed 401(k) brokerage account managed by an RIA could be a valuable addition to your retirement planning.

If you’re interested in learning more, please reply to this post or call the office so we can discuss your options. It would be my pleasure to discuss how we can devise a retirement plan tailored to your needs and goals.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.