You might be ready for the SDBA in your firm’s 401(k)

RJH Consulting

By: Ric Lager

You might be ready for the SDBA in your firm’s 401(k)
Self-directed brokerage accounts (SDBAs) within 401(k) plans, are under-utilized by attorneys. This under-representation is a shame. It indicates missed opportunities for attorneys. To optimize their retirement savings and achieve financial independence.

It's essential to understand what SDBAs are. And how they can benefit 401(k) retirement investors. SDBAs are investment accounts that allow individuals to manage their own retirement savings. Within an existing 401(k). 

These accounts provide access to a wider range of investment options. Including individual stocks, bonds, exchange-traded funds (ETFs). Along with an expanded menu of mutual funds.
Most SDBA investment options are available at a lower cost. Compared to the default company 401(k) menu of mutual funds. These investment options offer a greater potential for improved long-term investment performance.

Many SDBAs allow account holders to hire professional advisors to manage their 401(k). This provides personalized guidance and expertise. To improve retirement savings goals. 

It's crucial for attorneys to be aware of the benefits of SDBAs. And to consider using these accounts to optimize their retirement savings. Here are some strategies that can help attorneys make the most of SDBAs.

Do you have the SDBA option available?
Knowledge is power. Understanding the ins and outs of SDBAs. Their features and benefits. The annul costs and expenses. The first steps toward making informed decisions about this 401(k) account option.
Take advantage of educational resources provided by your firm’s 401(k) provider. Call the provider to find out if this important 401(k) account option is available to you now.
If the SDBA is not available, ask why not? This question may start with your firm’s Human Resources or Benefits Department.
Many times, an individual 401(k) participant only needs to ask this question. Regardless of the size of the law firm. The SDBA account option can be “turned on” when the correct procedures and sequence occurs.

Getting the most out of your SDBA
Before making any SDBA investments, assess your risk tolerance. Make sure that your 401(k) investment choices align with your financial goals. And comfort level for potential principal loss. 
Your firm’s 401(k) provider likely has online tools and questionnaires. To help you gauge your risk tolerance. And how to best identify and select an appropriate investment strategy. You can also consult with a professional advisor. If interested in a more personalized 401(k) investment management strategy.
Diversification is a crucial aspect of any 401(k) investment management strategy. It can reduce principal risk. And increase investment returns over time. 
A well-diversified 401(k) portfolio includes a mix of stocks, bonds, ETFs, and mutual funds. All part of a logical and disciplined 401(k) investment management strategy.
Take advantage of the broad range of investment options available through SDBAs. Understand the impact of stock and bond market fluctuations on your 401(k) principal.

Unsure and overwhelmed by the SDBA?
Many 401(k) investors are unsure about managing their investments in an SDBA account. They feel overwhelmed by the expanded menu of investment options. And the investment management decision-making process.
Consider hiring a professional advisor to assist with your 401(k) SDBA account. Some advisors can even manage your 401(k) SDBA account for you. Doing the research, making the trades, and monitoring the account holdings. 
An advisor can provide personalized guidance. And help you develop a tailored 401(k) investment management strategy. Aligned with your long-term financial goals and risk tolerance. 
There may be fees associated with hiring an advisor. Research suggests that the benefits of professional guidance can outweigh the annual costs. And lead to higher investment returns on your 401(k) investments.

How an SDBA advisor can help
Maximize the potential of the SDBA in your firm’s 401(k). Review and adjust your investments as needed. This may involve rebalancing your portfolio. 
Check the investment performance of individual investments. Make the necessary changes to your 401(k) investment strategy. If your financial goals, risk tolerance, or stock and bond market conditions change. 
The under-utilization of SBDAs by law firm professionals represents a missed opportunity. To lower annual 401(k) fees and expenses. And to optimize 401(K) investment returns.
Find out if the SDBA option is available now in your firm’s 401(k). And take the time to educate yourself. Update your stock and bond market risk tolerance. Consider professional guidance. 
Ric Lager is president of Lager & Company, Inc., a registered investment advisory in Golden Valley, Minnesota. Ric has produced two online CLE courses.
“An Expert’s Perspective: Individual 401(k) Management for Attorneys.”
“New CLE on the Cost of Your IRA 401(k) Problem”
Ric also publishes the weekly “401(k) Newsletter on LinkedIn.

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