401(k) Gambling and the Self Directed Brokerage Option

Ary Rosenbaum
Contact

Growing up as a kid in the late 1970’s, my favorite baseball player was Reggie Jackson (before I met him, but that’s another story). Reggie brought a lot of excitement to the game as he hit 563 homeruns, but he only batted .262 lifetime and struck out 2597 times, which is an all-time record. So Reggie could hit out of the park, but he failed to make contact a lot more times (he only had 2584 hits). On the other hand, Tony Gwynn had only 135 career home runs, but he had 3141 hits and a .338 lifetime average. When it comes to retirement investing, I believe that plan participants need to invest like Tony Gwynn played instead of the way Reggie Jackson played. That means more contact, more singles and doubles, and less striking out. That means investing for the long term through the use of asset allocation, dollar cost averaging, and the use of diversified investment options (whether they are mutual funds or exchange traded funds) instead of the use of high risk investments or speculative stocks. Retirement savings should be about long term growth, outpacing inflation, and having enough savings to last through retirement. A retirement account is not a get quick rich scheme or gambling, because as many time that you win a big bet on a speculative stock, there are more times that you strike out like Reggie Jackson. Sometimes Reggie swung so hard and failed to contact that he fell on his rear end. A plan participant should never let that happen to them in their retirement savings.

Many 401(k) plans, especially professional organizations offer self directed brokerage accounts to plan participants. While some plan sponsors offer it to offer more choices to their plan participants (it’s usually the owner-employees who demand it), it is fraught with many hazards. The hazards are to the participants who use them, the cost of running the plan, as well as possible qualification and liability issues for the plan sponsor. The self directed brokerage option is a gamble that 401(k) plan sponsors should considering taking a pass on before rolling the dice.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Ary Rosenbaum
Contact
more
less

The Rosenbaum Law Firm P.C. on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.