New Employer Offers Self-Directed 401k

[Amber K.]

I was "traded" last year to a subsidiary of my long-time employer and that subsidiary is now an independent company.

When signing up for benefits this week, I noticed something unusual about their 401k offering. They called it a 404c. There's not a lot of information out there from an employee's perspective on a 404c, but this appears to be a great option for the corporation to reduce liability from losses it's employees might experience while investing.

The basis of the plan had about 15 funds that were not very good. I am half tempted to keep my money in my previous employer's plan. That was until I noticed an area in smaller type that says self-direct your 401k. It said I needed a brokerage account to do so.

Is this anything like a self-directed IRA?

[Brit F.]

@Amber K., read through the plan documents to find out what you're allowed to invest in through the self-directed 401k.  Typically, it gives you the ability to invest in traditional securities (stocks, bonds, CD's, ETF's, etc), within some guidelines - such as restricting you from buying leveraged securities.  Rules/restrictions depend on your plan.  Compared to a standard 401k, the self-directed variant is great because it offers much more control for the account owner.  

However, it would be unusual for a self-directed 401k to have the same freedom as a Solo 401k or SDIRA. 

If you have the option to roll your previous 401k into a SDIRA or Solo 401k, that would create the most investing flexibility.

Might be worth a call to your HR/Benefits ppl and/or the 401k custodian.