Everything You Need to Know About Your "Secret" 401K Option: The Self-Directed Brokerage Account, from Johnathon T Davis of JT Davis Asset Management
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Everything You Need to Know About Your "Secret" 401K Option: The Self-Directed Brokerage Account, from Johnathon T Davis of JT Davis Asset Management

Tuesday, September 7, 2021 2:35 PM
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JT Davis Asset Management

LEXINGTON, KY / ACCESSWIRE / September 7, 2021 / You probably already know that a 401k is a workplace retirement savings plan offered by most American employers. With each paycheck you receive, a portion of your money goes into an investment account or accounts of your choosing.

However, most people are not aware of this one thing: if you have a 401k, 401a, 403b, or 457 at your job, many hospitals, universities, municipalities, and large private employers "secretly" have a self-directed brokerage option that allows each employee the opportunity to personally add more options to their investment menu, or to have a licensed advisor actively manage their 401k on their behalf. Over 100,000 plans currently allow it, and more are being added every day. You no longer need to "wing it" when it comes to managing your investment choices-you can now hire an expert to do it for you... every day.

So why don't you know about this?

In the past, a few frustrated employees were brave enough to bring civil actions against their employers citing a "breach of fiduciary duty"; in other words, not offering enough guidance to properly manage their investments, and leaving employees to try figure out how to navigate the available options effectively enough to retire on their own-and the employees were winning! This prompted many companies to quietly add the self-directed option to protect themselves from potential litigation.

Congress passed The Pension Protection Act of 2006 (PPA) to protect retirement accounts and to hold companies that underfund existing pension accounts accountable. It also provided a mechanism by which employers can safely transfer their fiduciary duty to a duly licensed third party: i.e. a Series 65 Investment Advisor.

Which 401k investment options can you choose?

It's unfortunately become the norm for employees to blindly pick one or more of the mutual funds that their company plan offers, then pray that it will be enough when the time comes. It's important to note that your HR person (nor your office mates, nor your mom) is not responsible for your 401k's success or failure. It's the same for your company's 401k platform. Whether it is Fidelity or TIAA or any of the others, they are not responsible for managing your individual investment account; they are solely responsible for The Plan. What happens in your account is entirely up to you.

There are professionals who can help. Here are two more options to choose from: self-directed brokerage or third-party management.

Self-directed brokerages

You can usually go to your company website and type in "investment advisor" or something similar to find information and options on this. There you can find out if your plan will allow an advisor-specifically a credentialed fiduciary- to actively manage your 401k for you.

You can also choose to manage your plan on your own-opting out of the options your employer lays out for you, and investing in the index funds, stocks and bonds of your choice using an institutional account outside of your employer's investment account, but still technically inside of your 401K for tax purposes. You can even keep receiving the company matching portion and use that at your discretion as well.

Third-party management

If you seek help, it's generally advisable to work with an independent, third-party fiduciary or someone else not employed by your company, to manage your individual 401k account without a conflict of interest.

Some employers allow third-party advisors to access their 401k platform, while others do not. Some employers will allow the third-party advisor to assist, but without direct compensation. Go online to your company HR website to find out what the rules are.


Meet Your Financial Advisor, Johnathon T. Davis

Johnathon T. Davis is a Series 65 Fiduciary Advisor featured in numerous financial magazine publications and has been the featured guest on countless financial podcasts.

He is the managing principal of the multi-advisor firm JT Davis Asset Management, a financial service provider. The company offers services such as retirement planning, financial coaching, life insurance, guaranteed lifetime income, budgeting, and more.

If you're ready to build a solid financial future, visit www.jtdavisky.com today.

Company Name: JT Davis Asset Management

Contact Person: Johnathon T Davis

Address: 444 E Main St #101, Lexington, KY 40507

Phone Number: 859-608-6594

Website Link: http://www.jtdavisky.com

SOURCE: JT Davis Asset Management

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