If you are like many individuals, you are probably saving for your retirement through one type of retirement plan or another. If you are saving in your employer's retirement plan, do you know all of your options? There is one new option that has been added to many 401(k) and 403(b) plans that you may not know about. This option is called a self-directed brokerage accounts, or SDBAs.

If you are unhappy with the choices offered in your retirement plan or might just like more flexibility, read on.


Self-directed brokerage accounts are inside some traditional 401(k)s and 403(b)s. They offer participants a window where they can trade investments that aren’t necessarily in the plan’s lineup (core investments). This option provides more choices and control over what happens to their asset-allocation strategy.

A self-directed brokerage accounts is a window inside of your retirement plan. You move money from your core lineup into your SBDA. Once you have done this, you have the flexibility to choose from a much broader selection of investment choices and these choices will depend on your plan. Some companies that offer a self-directed brokerage account option in their 401(k) plans include Caterpillar, Pepsico and John Deere.These options are also offered in 403(b) plans at hospitals and universities.


You’ve likely heard of target date funds, which are the umbrella portfolios 401(k) providers offer for participants that want a “set it and forget it” approach. These TDFs are determined by what year you want to retire and adjust the portfolio risk as the date gets closer. But for investors that want more choice and flexibility, these TDFs often fall short.

SDBAs expand the range of investment choices beyond core investments. If you are working with a financial advisor they may be able to assist you in the manage of your retirement plan through the SDBA. They are similar to traditional brokerage accounts and allow employees to transfer a portion of their investments from the core account to their SDBA.

Although SDBAs offer more flexibility, they should only be used by investors who feel comfortable managing their own risk or are working with a professional investment advisor.


According to a study done by Vanguard, individuals who work with a professional earn 3% more returns that investors who handled the portfolio on their own1. Often times, emotion drives investors to buy the latest hot fund and they end up buying high and selling low. This approach stems from buying on greed and selling on fear, which can compromise long-term objectives.

Working with an advisor can help investors achieve better results and answer questions such as:

  • How much risk should I be taking at this stage in my saving journey?
  • How can I avoid market timing mistakes?
  • How does market volatility affect my investments?
  • Which is better for my situation, pre-tax or after-tax using the Roth option in my 401(k) or 403(b)?

These are just some of the questions we regularly hear from our clients and our team is always ready to answer these, and the many more, concerns. Is it time to see if your plan offers a SBDA option?

If you have questions about whether your company offers a self-directed brokerage account option or would like guidance with your current SDBA or other retirement account, don’t hesitate to reach out today. We would be happy to clarify the questions you may have.

1Vanguard’s study based on their Alpha framework. Putting a value on your value: Quantifying Vanguard Advisor’s Alpha, Vanguard Research, 2014.