Since inception, I chose Vanguard target year-based 401k plan -- that is a combination of stock and bond adjusted over years to balance risk/reward. Since I've been busy with works and life in covid, I didn't look to optimize the plan. It seems the return on these plans are significantly lowered compared to popular index funds. So I plan to move the fund to self-directed brokerage (vanguard to TD Ameritrade). Below are some confusions -- 1. How are the tax implications on the capital (pre-tax 401k) and gains already made? 2. How are the tax implications on future capital gains? 3. In market downturn, is it possible to move back the fund from brokerage to 401k plans? Any tax implications on that transfer? If you moved 401k to self-directed brokerage, suggest your thoughts and tips. Thanks in advance. #personalfinance #investments
Highly recommend, did it 3 years ago- I was able to invest in individual equities and options and 2.5x my money.
Thanks! Mind sharing details on tax impact? I’d eventually like to individual equities and more diverse ETF that I’ve done control. It seems poor that 401k plan provider doesn’t allow brokerage by itself — making it complex to move fund from 401k plan to brokerage.
I had no issues in that respect - I had an option through my 401k provider (empower) to start a self-directed account (Schwab) - it was pretty easy to set up, it's also easy to transfer money from the 401k account to the self-directed brokerage account.
I don’t understand your question. If you withdraw your pay ordinary income tax and a fee. If you just pick the stocks, as long as your broker let’s you, then there are no taxes.
Does 401k to brokerage transfer mean capital withdrawal? I don’t intend to withdraw this investment. I want more control on where these investments can be made. Don’t understand why 401k plan provider does not integrate brokerage service?
Some do, fidelity has a service called Brokerage Link. Whether or not your provider can offer this is influenced by your company. If you remove the funds from your 401K and not into another 401K that will trigger a taxable event.
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I’d wait to see if this bill passes if you want to venture beyond stocks - https://www.handsoffmyira.com/
Do you trade differently between IRA and normal broker? Like sell quicker or anything like that?
Self directed IRAs can be used to pretty much anything (like making real estate investments). There are separate trusts that you can use to do this (not the standard fidelity etc.).