3 Considerations before Opening a Self-Directed 401k

Opening a self-directed 401k can be very beneficial and provide you with extra control over your retirement. Before you open this type of account, you will want to consider a few different things. Here are some considerations before opening a self-directed 401k.

1. Investment Selection

Before you open this type of account, you need to make sure that you understand how to choose investments. When you are taking the controls of your retirement plan, you need to be sure that you know how to pick the investments that will get you there. Choosing the right investments can give you a very comfortable life during retirement. Choosing the wrong investments could force you to work longer than you want.

2. Asset Allocation

Before you open a self-directed account, you also need to make sure that you understand asset allocation. This is just as important as selecting the individual investments themselves. As you closer to retirement, you need to be able to allocate more investment dollars to fixed income securities instead of equities. This will help you limit the amount of risk in your account.

3. Rules

When you are in charge of your own account, you need to make sure that you understand the rules. You do not want to contribute more than is allowed or take early withdrawals.

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