What Is a Self-Directed 401k?
A self-directed 401k is the most common type of retirement savings plan in the United States. It is also known as a participant-directed plan. The option means that the saver makes his own decision about how the money he saves is invested, though in many cases, this will be on the basis of professional advice. A 401k plan takes its name from the relevant section of the Internal Revenue code, the combined body of United States tax law. The plan allows workers to save for retirement and deduct the money they save, known as contributions, from their taxable income. They then pay income tax on this money as and when they receive it after retiring. Though the worker still pays tax on the money in the end, the delay means the money put into the 401k can grow over time rather than go straight to the IRS.
