401k Planning: Setting Up a Self-Directed 401k

A self-directed Individual Retirement Arrangement (IRA) will provide you with more control of your retirement than traditional 401k planning. A 401k account is set up and managed by a company on behalf of an employee. If you are willing to forgo the services and benefits given to you by your employer, you can open your own IRA in a few simple steps.

Opting Out of Employee Plans

You will have to choose to not elect your employer's 401k options. To do this, make sure you are not automatically enrolled. You will be forgoing any matching options your employer provides by taking this step, so be prepared to lose this benefit.

Set up your IRA

Contact an IRA trustee or administrator who you trust to hold your account. The IRS requires an administrator other than you monitors the account and provides you with regular statements for tax purposes. Once you have chosen your administrator, you can choose the self-directed option in order to make all investment decisions yourself. The administrator will only be involved to make sure you are following all IRS regulations on the account. Regulations include the types of investments you can make, contribution limits and minimum distribution requirements.

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