Self Directed 401k Plans

Self Directed 401k Plans allow the individual employee a chance to invest in their retirement plan and have a say on how it is invested. They can be a great thing for some employees, yet a terrible thing for others.

With a traditional 401k you deposit a small percentage of your paycheck into a retirement plan and have someone else manage your account for you. You rely on these professional money managers to invest your money wisely and turn a profit.

But now there are 401k plans which allow the average employee to manage their own fund if they choose. Many of these 401k plans will also let you invest in a wide variety of securities, but not all plans do.

Some companies will let you direct your retirement account, but limit you to mutual funds. Other companies will not let you direct your own account, and for good reasons.

Why Do Some Companies Not Let You Direct Your Own IRA Investments?

A lot of companies feel like the average person will not make good investing decisions with their own money. Most people are too emotional and may not have the knowledge and experience necessary to make money from their investments.

Even more then that, not all companies want to let their employees direct their own 401k plan because it might look bad on them if their employee lost all of the money in their 401k account. There is also the possibility of legal issues coming up from it. I don’t know if any employee has tried to sue their employer for bad investment decisions the employee himself made, but I’m sure no large corporation wants to test how far people will go.

It would be nice if you could manage your own investment account, but the argument against it is that most people will not take the time and patents they need in order to make money from the market. After all 90% of traders fail to make money in the stock market.

That means most people don’t know what they are doing when they enter the stock market and it is the reason why many big companies do not allow individuals to open self directed 401k plans. If your employer does be honest and ask yourself if you think you are prepared to learn how to invest.

Not Everyone is meant to Invest Their Own Account

I have been around enough people who opened their own account to figure out that not everyone is cut out for investing.

It does take a lot of work to get the best return possible and there are a lot of emotions involved in it. That doesn’t mean that it can’t be a great choice for the right individual. Just remember when opening up your own self directed plan you are fully taking on the risk.

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