Plan Limitations

• A 401k plan is an employer-sponsored tax-qualified retirement plan. As such, the employer -- and the plan trustee, if applicable -- has certain fiduciary responsibilities and liabilities. To address these duties, employers limit the investment options in 401k accounts to those they can monitor. Your employer will choose mutual funds and investment managers it believes are sound financial options that can provide a diversified portfolio. In most cases, employers do not allow plan participants to invest outside of these limited options.
  
  

Margin Requirements

• Successful day traders trade in margin accounts, borrowing funds and stocks from their brokers to fulfill trade orders. These accounts are required by law for any pattern day trader -- that is, someone who buys and sells the same security within the same day more than four times in a five-day period. These accounts must contain at least $25,000 in cash and securities at all times. Margin trading is a loan, with your retirement assets as collateral. Most interpretations of 401k laws consider this type of loan a prohibited transaction. Even if it were allowed, margin accounts require the ability to deposit funds at a moment's notice, something that is generally not possible with 401k accounts.
  
  

Imprudent Investing

• Day trading is a risky activity. Traders often end up in debt, and even successful traders lose money regularly. This type of risk is not a good way to protect retirement savings. In addition, the skill and attention required in day trading is a full-time job -- traders must be available when the market is open, opening and closing positions within the same day, and constantly educating themselves on trends and strategies. This may be impractical for most people, especially those with another job.
  
  

Long-Term Investing

• Most people begin saving for retirement when they are fairly young. Even if you start a little later, time is likely to be on your side. History has shown that people who choose their investments carefully and practice patience usually earn good returns over time, but time and patience are key.