Are there any recognized retirement plans / IRA accounts that also allow me to trade in stocks/options

Question

The company that I work for was recently acquired by a much larger company. One consequence of this is that my company decided to discontinue their 401k plan and move us all to the larger company's plan.

Part of the discontinuation of the original 401k plan is that the funds I had on it have been made available for distribution. I have been given the following options:

1. I can request the vested balance to be sent to me (minus taxes and fees).
2. I can request a direct rollover of the vested account balance to "another eligible retirement plan".
3. I can request a direct rollover of the vested account balance to an IRA of my choice.

The question I wanted to ask is, are there any companies that function like online brokers (similar to E-Trade), allowing me to trade in stocks and options, but whose accounts are also considered eligible as retirement plan accounts?

(Most of the IRA accounts only seem to allow me to select categories of companies to invest in, or something like that. I would preferably like to invest the funds on my own, with the same kind of freedom as I would have with my own cash.)

Answer 1

You can open a self-directed IRA with most any online discount broker.

Self-directed IRA is the answer to your question and that is the account type you need to ask different institutions about. Some will allow options trading as well and I have never had a problem with that in my own self-directed IRA

Answer 2

Yes, there are many banks/brokers/others that will let you rollover your 401(k) into an IRA including E-Trade.

Investapedia has decent guide to get you started and look at the important question of whether to roll into a normal or roth IRA.

Edit in response to comment: 401(k)'s (and rarely seen IRAs through your job) are restricted by the company's chosen investments but IRAs outside the company's program typically have few restrictions. IRAs directly through banks/brokers almost always have the only the same restrictions as normal accounts at the firm except for withdrawls, of course.

E-Trade, for instance, markets "Choose from stocks, ETFs (exchange traded funds), bonds, and over 8,000 mutual funds." for their rollover IRAs. They likely allow options as well but talk to their sales reps and there will be extra paperwork as there is for options on all accounts.

Answer 3

When I left a job I would roll my 401-K into an IRA at Scottrade. That IRA was one that I opened myself,it was not offered to me by any employer. After opening that IRA, I could then request the manager of the 401-K to send me a check made out to Scottrade referencing the account I had with Scottrade. Once I got that check I took it to a Scottrade office and they deposited it into the IRA. With Scottrade, I was able to speculate in options once my balance got high enough ($10,000 I think it was). As the IRA was opened by me and not by any company that I worked for I was able to buy any security that had a ticker symbol. I was also able to buy a zero coupon bond. You should be able to do the same with any IRA that you open yourself.

Answer 4

IRA choices include individual stocks, your choice of any traded, as well as mutual funds. IRAs also permit options, you can buy calls or sell covered calls if you are approved.

Answer 5

CQM answered it best. I will augment (I'm new, so can't "comment". But there is additional answer material here, so I'll put it as an answer. But CQM got there before me :) ) I agree with the other answers too (as of now).

I did what you're asking myself upon termination of the 401(k). Hallelujah, now I am no longer a victim to those canned funds. Now I'm self-directed.

The major brokerage houses are quite civilized if you just call them and tell them exactly what you told us, as to telling you what you can do there. It is very unlikely that they will pressure you to do anything (that would be a costly news story if that happened and was publicized).

So you can get what you want from TDAmeritrade or Scott or several places. I suggest you do call several. Costs and services do vary. Costs per trade, annual or monthly fees, etc. Some have "retail" offices you can walk into; some may not have any within 500 miles of you. Whether by phone or in person, though, they are all very good at understanding what you've laid out and giving direct, comprehensible answers.

And if you really, really want to prevent them from calling back and pestering you, use *67 prefix when you call :) (I don't believe that works for toll free numbers BTW.)

Don't take your option 1, unless you turn around and restart an IRA or new 401 in the legal rollover period. Even that route can be harshly expensive - you can google about that. (The forced witholding)

One restriction I do know of is that I cannot short stocks in my IRA, though I can in my personal ("aftertax") account with the same broker. Ask a broker about "trading level" - e.g. "level 2" - to understand IRA restrictions on trading.