Saen Higgins outlines your options, and his preferred structure, for establishing your self-managed retirement account.

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When it comes to saving for retirement, traditional employer-sponsored 401k plans are the norm. However, for those who are self-employed or work for a small business without a 401k plan in place, a self-managed 401k can be a viable option. A self-managed 401k allows individuals to take control of their retirement savings and invest in what they believe will yield the most significant returns. But how do you structure your self-managed 401k for success? Let’s take a look.

1. Maximize your contributions

As with any retirement account, the first step to success is to maximize your contributions. For 2021, the maximum contribution limit for a self-managed 401k is $58,000, including catch-up contributions for those over the age of 50. By contributing the maximum amount allowed, you can take advantage of compound interest, which will help your savings grow significantly over time.

2. Diversify your investments

While investing in one specific asset may seem like a good idea at the time, it can also be extremely risky. To minimize risk and maximize returns, diversification is key. A well-diversified portfolio typically includes a mix of stocks, bonds, and mutual funds. Consider investing in both domestic and international markets to spread out your risk even further.

3. Consider adding alternative investments

Many self-managed 401k plans allow for alternative investments, such as real estate or cryptocurrency. These types of investments can be more volatile than traditional stocks and bonds, but they can also yield higher returns. It is essential to thoroughly research and understand any potential alternative investment before committing your funds.

4. Review your investments regularly

One of the most critical aspects of a self-managed 401k is actively managing your investments. It is essential to regularly monitor your portfolio’s performance and make changes if necessary. Keep an eye on market trends and adjust your investments accordingly. Rebalancing your portfolio periodically can also help ensure that your investments remain well-diversified.

5. Work with a financial advisor

Finally, working with a financial advisor can be a beneficial step in structuring and managing your self-managed 401k for success. They can provide advice on portfolio diversification, alternative investments, and choosing the right investments for your specific goals and risk tolerance. They can also help you stay on top of market trends and adjust your portfolio as necessary.

In conclusion, a self-managed 401k can be an excellent option for those looking to take control of their retirement savings. By maximizing contributions, diversifying investments, adding alternative investments, reviewing investments regularly, and working with a financial advisor, you can structure your self-managed 401k for success.