Vanguard solo 401K - Admiral shares

[Calm Man]

All posts I have reviewed and web searches indicate that you cannot use Admiral Shares in the Vanguard solo 401K. I haven't finalized the amount I will contribute for 2012 but did a test run at the site today. I put in a number like 20K and it gave regular, admiral and even institutional shares as options with the minimums (3000, 10k, 100K). Since I don't have enough in it to see if it would really work, is this just a default showing of funds or does anybody know if you can actually use Acmiral shares?

[Noobvestor]

I use an SEP IRA through Vanguard, which works. Odd they wouldn't allow it for the Solo 401k option.

[Dale_G]

For some reason, Admiral shares are not offered in solo 401k accounts at Vanguard.

Dale

[dickenjb]

Calm Man - I can confirm it will not let you buy Admiral shares.

However there is a workaround. You can buy LS Income which is 80% Total Bond II. Total Bond II has Admiral class expenses and can not be bought itself, only through funds-of-funds. The total ER is 13 bps which is just 2 or 3 bps more than the Three Fund Portfolio. I buy LS Income in my Solo 401(k) and just buy less fixed income elsewhere to hit my desired 60/40 AA.

PS the same is true for 403(b) accounts at Vanguard. Best to buy the bond heavy LS Income there and overweight equities elsewhere. Portfolio Watch makes it easy to monitor overall AA and Domestic/International split. Only downside to this approach is you lose the FTC on the 6% of LS Income in International.

[Eric]

Only downside to this approach is you lose the FTC on the 6% of LS Income in International.

I had a similar thought. IIRC, the foreign tax credit is worth about 20 basis points. 6% of that is about 1 basis point. Putting all this information together:

-- An 80/14/6 mix of Total Bond Admiral, Total Stock Admiral, and Total International Admiral has an overall expense ratio of (.80)(10) + (.14)(6) + (.06)(18) = 10 basis points.

-- LifeStrategy Income, with the same asset allocation, has an overall cost of 13 + 1 = 14 basis points.

[expat]

I put only the employee portion into the solo 401K and the employer portion into a SEP IRA where I can use Admiral shares.

[Eric]

I put only the employee portion into the solo 401K and the employer portion into a SEP IRA where I can use Admiral shares.

I'm not sure it's permissible to contribute both to a solo 401(k) and a SEP IRA for the same business for the same period (even if one contribution is made by the "employee" and one by the "employer"). Have you gotten professional advice on this issue?

[expat]

I'm not sure it's permissible to contribute both to a solo 401(k) and a SEP IRA for the same business for the same period (even if one contribution is made by the "employee" and one by the "employer"). Have you gotten professional advice on this issue?

Yes. My accountant is ok with it.

[neurosphere]

I'm not sure it's permissible to contribute both to a solo 401(k) and a SEP IRA for the same business for the same period (even if one contribution is made by the "employee" and one by the "employer"). Have you gotten professional advice on this issue?

Yes. My accountant is ok with it.

Hmm, that's interesting. Does anyone else do this, or have more information on having both a SEP IRA and a 401k for the same employer? I was also under the impression this was not allowed. Could I then have two solo 401k plans? I.e. one at Vanguard and one at Fidelity, as long as I abided by the contribution limits?

I guess I could google it...but then I'd be depriving a boglehead of being able to pad their post count.

NS

[JamesSFO]

I'm not sure it's permissible to contribute both to a solo 401(k) and a SEP IRA for the same business for the same period (even if one contribution is made by the "employee" and one by the "employer"). Have you gotten professional advice on this issue?

Yes. My accountant is ok with it.

Hmm, that's interesting. Does anyone else do this, or have more information on having both a SEP IRA and a 401k for the same employer? I was also under the impression this was not allowed. Could I then have two solo 401k plans? I.e. one at Vanguard and one at Fidelity, as long as I abided by the contribution limits?

I guess I could google it...but then I'd be depriving a boglehead of being able to pad their post count.

NS

As long as you abide by the contributions limits (and if applicable testing and reporting requirements) you can have multiple plans as an employer.