It might be a common sense that you don’t operate your 401k or IRA rollover accounts same as your brokerage accounts where you can simply buy and sell (or even short) stocks on the daily basis. But, do you know you can still manage these retirement accounts actively? Let’s take a look at our options.
Brokerage linkage
More and more institution started to offer the brokerage linkage to your IRA account couple of years ago. Once linked, you should be able to trade almost most of stocks and ETFs. The trading frequency is limited, it takes at least one day to settle a trade, so you can not do high frequency trading in any way. And you can’t short sell a stock either. However, other than the fancy trading operations, you pretty much have all the basic capabilities as with a regular brokerage account. Amazing!
Investment portfolios
Since the day one of retirement account, we are offered with a set of investment portfolios that we can choose to invest our money. For some of the old fashioned institution, this is still our only option, you are stuck with a limited number of portfolios, for instance, 20 to 30 of them.
However, if you have gone through these portfolios, there’s still full of surprising choices there. The common ones are the retirement (or growth) portfolios, such as xxx 2050 etc. Sometimes you will be lucky to have a privately managed funds such as Dodge & Cox. Also you can have a money portfolio where you can buy dollar for a dollar.
Sometimes these dollar portfolios can be a federal money market fund where you can earn the current interest rate up to 4%. For the worst case, most offers a stable asset fund where you can earn a small gain around 1%. If you are interested at any dollar to dollar purchase for your protection of principles, these are the perfect portfolios to start with. Please refer to Use Cash to Hedge Interest Rate to understand the concept. History has proven that we are not always locked in the 10%-15% gain from investing in the growth portfolios. Just be aware.
After you choose one portfolio to invest, you can set the amount to invest every month. Surprisingly, you can still change the portfolios for the invested money afterwards. You have to take the frequency of doing that much lower, because each transaction might take up to three days. But if you are a long term investor, the good news is that you can still trade between portfolios inside your retirement account. Which means if you happen to have quite a bit of money in IRA, it’s not a dead-end to put your investment strategy to work. This is something worth to explore in the coming future.
Separation or Hardship
There’s one thing after you have worked with couple of companies in the past, you ended up with quite a few 401k/IRA rollover accounts between different institutions. This is when you can consolidate by moving the funds in between.
There’re two main categories of withdrawn operations. One that we are familiar with is called separation, which means you finished your current employment, so you want to take the money as you go. These days it only requires you to fill a form online to get this job done. Wola!
There’s another one called hardship. I won’t go in details, but this is when you want to borrow against this money to fund some sort of emergency of yours. In that case, you have a choice. Nice.
Summary
There’s a trend that the retirement account may eventually look more and more like a live brokerage account. Before we get there one day, your 401k/IRA rollovers might be already in a stage where you can actively manage them. So give yourself some time and have some fun playing there. Because it’s all your hard earned money, if you want to be more responsible, then you are not without a help.
