Trading Options for Your 401(k)

About 40% of companies offer self-directed brokerage accounts in their 401(k) plans, giving participants more investing options.

Illustration of a kayaker going over a waterfall with a gold next egg
(Image credit: Illustration by Jon Krause)

While most IRA providers allow you to invest in a broad universe of mutual funds, exchange-traded funds and individual stocks, the rules for 401(k)s and other employer-provided retirement plans are typically more restrictive. Most offer a limited menu of mutual funds from which to choose, including target-date funds, which are one-stop portfolios of stocks, bonds and other assets that gradually become more conservative as you near retirement.

Many employees are just fine with a limited selection. Studies have shown that offering workers too many options reduces participation rates. Faced with too many choices, some workers simply throw up their hands and walk away. In addition, employers are required by law to act in the interest of plan participants, which makes them reluctant to offer untested or risky investment choices.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.