401K plans can be self directed or they can be a traditional plan which is managed by somebody else. So, what are these plans and which one best fits you? Here is some 401k information about it.
First of all let’s look at what the plans actually are and what your options are. Traditional 401k plans are managed by professional money managers. You invest your money into it and then it is managed by someone else.
The idea here is for them to make a somewhat steady return on your money of many years until you eventually retire. This way you have some extra money to support yourself after you have retired.
The other option to this is a self directed 401k plan. Now, not all companies have a self directed 401k option but if yours does it can be an interesting to look into. With a self directed 401k you are allowed to decide how the money is going to be invested.
Unfortunately most of these plans limit you to mutual funds. In other words they simply allow you to pick a company to invest your money for you. So, while you do get to invest it your options may be limited.
If you want more investment options for your retirement plan you can always start an IRA plan and do a 401k to IRA transfer. IRA’s typically give you a lot more options so you could always create an IRA and switch your money over to that account taking advantage of the new options.
So, what is the best option for you? Well, it kind of depends. If you would like to be in charge of your own account and possibly make a much higher return on it then managing it yourself could be a good idea. However if you want the security that comes with letting professionals manage your account or if you do not trust yourself to invest wisely, then a traditional 401k plan may be the better option.
