Motley Fool's Robert Brokamp discussed three lesser-known 401(k) features: self-directed brokerage accounts, the mega-backdoor Roth and the rule of 55, which can waive the 10% early-withdrawal penalty for eligible workers. Some require specific plan features.
A self-directed brokerage account can expand the standard investment menu to include individual stocks and bonds. Brokamp said 20%–30% of 401(k) plans offer one, but only 1%–3% of eligible participants use it. For 2026, after-tax contributions can fill remaining room under the $72,000 total annual limit, plus applicable catch-up amounts, after employee contributions, matching and profit-sharing money are counted. The mega-backdoor Roth strategy depends on plan rules: converting after-tax contributions is generally tax-free, while converted earnings are taxable; nondiscrimination testing may also limit contributions, especially for highly compensated employees.
Under the rule of 55, employees who separate from service during or after the calendar year they turn 55 may avoid the 10% early-withdrawal penalty on money kept in the employer plan tied to that separation. The exception does not cover old 401(k) accounts unless they are rolled into the current plan before separation and the plan accepts the rollover; moving funds to an IRA or a new employer's plan forfeits it. Some eligible public-safety workers may qualify at 50 or after 25 years of service, whichever comes first. Ordinary taxes still apply.
