Individual 401K- options and advise

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ajbe
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Individual 401K- options and advise

Post by ajbe » Mon Nov 07, 2016 5:13 pm

I have been self-employed a long time and set up an individual 401k - sometimes called a solo 401k - before most people knew what one was. It has quite a bit in it. But I am getting killed on fees - to the tune of ~ 2% annually or like $10,000. It is depressing putting real dollars in each year only to have these fees eat away at what I just invested. I looked at finra's fund fee calculator and have several funds with like 7-12% fees. So maybe that is my problem. My account is held through Wells Fargo. I briefly talked to someone at Vanguard who said I could transfer to them "pretty easily" and truthfully, their funds look to have much lower fees. So do I need to move to Vanguard AND change out my investments to cheaper funds, or can I just try to get my Wells Fargo advisor to work with me on these fees?

Two kickers - my husband is now also self-employed so we are looking to set up a similar 401k for him. I'd like to get that right from the start. And two, my sister is my Wells advisor so I want to have the conversation right - if I need to. *ouch*

avalpert
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Re: Individual 401K- options and advise

Post by avalpert » Mon Nov 07, 2016 5:54 pm

Personally, I would move to a provider like Vanguard, Fidelity, Schwab or TD Ameritrade and use their cheaper available funds/etfs based on your preferences - no need for an advisor at Wells Fargo for your own 401k.

Ask your sister if she can handle your 401k for free exactly as you want - if not, you can still see her on Thanskgiving.

fabdog
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Re: Individual 401K- options and advise

Post by fabdog » Mon Nov 07, 2016 6:06 pm

Vanguard and Schwab have no fees for Solo 401K setup/ongoing

Both have very low cost funds you can leverage. You don't need an advisor

Mike

DSInvestor
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Re: Individual 401K- options and advise

Post by DSInvestor » Mon Nov 07, 2016 6:16 pm

Fidelity's Self Employed 401k is a great Solo 401k that does not have fees and offers low cost Fidelity index funds. The Fidelity plan accepts inbound rollovers from IRAs. No Roth option in the Fidelity plan.

Vanguard's Individual 401k offers the Roth option for employee salary deferral. No Rollovers from IRA allowed. Investment options limited to Investor share class of Vanguard mutual funds. Admiral shares, ETFs not permitted in the Vanguard plan.

FIdelity has a smaller selection of index funds than Vanguard but the ones offered have low expense ratios that match that of Vanguard Admiral shares. Unfortunately, Admiral shares are not available in the Vanguard Individual 401k plan.

livesoft
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Re: Individual 401K- options and advise

Post by livesoft » Mon Nov 07, 2016 7:34 pm

I have a TDAmeritrade individual 401(k) in which I purchase Vanguard ETFs for no commission. So far, no fees and superb service. Plus I can walk into the joint have have them do things for me. I do file my own Form 5500-SF (or is it 5500-EZ). I have the traditional and Roth options going for this plan.

I rolled over a previous 401(k) held at Fidelity into this 401(k).
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ruralavalon
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Re: Individual 401K- options and advise

Post by ruralavalon » Mon Nov 07, 2016 8:05 pm

DSInvestor wrote:Fidelity's Self Employed 401k is a great Solo 401k that does not have fees and offers low cost Fidelity index funds. The Fidelity plan accepts inbound rollovers from IRAs. No Roth option in the Fidelity plan.

Vanguard's Individual 401k offers the Roth option for employee salary deferral. No Rollovers from IRA allowed. Investment options limited to Investor share class of Vanguard mutual funds. Admiral shares, ETFs not permitted in the Vanguard plan.

FIdelity has a smaller selection of index funds than Vanguard but the ones offered have low expense ratios that match that of Vanguard Admiral shares. Unfortunately, Admiral shares are not available in the Vanguard Individual 401k plan.
That's a nice summary, I wish that I could remember the pros and cons of the solo 401k features at Vanguard and Fidelity.
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nyclon
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Re: Individual 401K- options and advise

Post by nyclon » Mon Nov 07, 2016 8:14 pm

ajbe wrote:I have been self-employed a long time and set up an individual 401k - sometimes called a solo 401k - before most people knew what one was. It has quite a bit in it. But I am getting killed on fees - to the tune of ~ 2% annually or like $10,000. It is depressing putting real dollars in each year only to have these fees eat away at what I just invested. I looked at finra's fund fee calculator and have several funds with like 7-12% fees. So maybe that is my problem. My account is held through Wells Fargo. I briefly talked to someone at Vanguard who said I could transfer to them "pretty easily" and truthfully, their funds look to have much lower fees. So do I need to move to Vanguard AND change out my investments to cheaper funds, or can I just try to get my Wells Fargo advisor to work with me on these fees?

Two kickers - my husband is now also self-employed so we are looking to set up a similar 401k for him. I'd like to get that right from the start. And two, my sister is my Wells advisor so I want to have the conversation right - if I need to. *ouch*

All of the above are good options. Etrade also provides a great solo 401k plan which supports both traditional and Roth, and provides the ability to take loans.

Based on other threads, not all of the above, if any, allow loans, and vanguard doesn't allow their lowest fee offerings via solo 401k (they charge almost the retail rate for mutual funds). You could get around that via ETFs.

ajbe
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Re: Individual 401K- options and advise

Post by ajbe » Mon Nov 07, 2016 9:41 pm

Wow! Thank you all for the quick and helpful responses. I guess I will call my sister to discuss next steps. We have had Vanguard funds before so I guess that was why I looked at those but I will have to look at some of the others like Fidelity.

@livesoft - so you file your own 5500? I was under the impression that is a real nuisance. Any advice? I figured I would just have to pay someone if I move out of Wells Fargo.

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Earl Lemongrab
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Re: Individual 401K- options and advise

Post by Earl Lemongrab » Tue Nov 08, 2016 1:31 pm

ruralavalon wrote:That's a nice summary, I wish that I could remember the pros and cons of the solo 401k features at Vanguard and Fidelity.
Sounds like someone needs to start a "Final, Definitive . . ." thread to collect all the various i401(k) providers, with plus and minus for each.

Earl
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avalpert
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Re: Individual 401K- options and advise

Post by avalpert » Tue Nov 08, 2016 1:35 pm

ajbe wrote:Wow! Thank you all for the quick and helpful responses. I guess I will call my sister to discuss next steps. We have had Vanguard funds before so I guess that was why I looked at those but I will have to look at some of the others like Fidelity.

@livesoft - so you file your own 5500? I was under the impression that is a real nuisance. Any advice? I figured I would just have to pay someone if I move out of Wells Fargo.
It is not a difficult form to fill out - see a nice walk through of it here: https://thefinancebuff.com/form-5500ez- ... -401k.html

rrppve
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Re: Individual 401K- options and advise

Post by rrppve » Tue Nov 08, 2016 1:39 pm

ajbe wrote:Wow! Thank you all for the quick and helpful responses. I guess I will call my sister to discuss next steps. We have had Vanguard funds before so I guess that was why I looked at those but I will have to look at some of the others like Fidelity.

@livesoft - so you file your own 5500? I was under the impression that is a real nuisance. Any advice? I figured I would just have to pay someone if I move out of Wells Fargo.
The 5500-EZ for a solo participant plan is pretty straightforward. Just report the balance and contributions. Check a few boxes and file in July, I think. Your custodian sends you a form with all the info you need. My solo 401k is with Fido and they're pretty helpful with any questions.

pkcrafter
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Re: Individual 401K- options and advise

Post by pkcrafter » Tue Nov 08, 2016 1:47 pm

One fundamental rule that is wise to follow is never invest through a relative or friend.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Hub
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Re: Individual 401K- options and advise

Post by Hub » Tue Nov 08, 2016 4:27 pm

This thread is relevant to my interests. Thanks for all the helpful info.

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