Which fund for Solo 401K

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spdoublebass
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Which fund for Solo 401K

Post by spdoublebass » Mon Jun 19, 2017 11:31 am

I know this is a basic question, I'm just looking for confirmation that I am thinking clearly.

I recently opened a Solo 401K. I have to pick a fund, I'd like to stick with one fund because Vanguard charges $20 per fund. Also, I'm not dealing with huge amounts of money in this account.
At first I was looking through the different funds and thought some were nice like the Wellington (VWELX), but I quickly realized how this would effect my overall AA. Then I realized I could just pick 1 of the 4 funds I use in my ROTH IRA and incorporate that into my overall AA. Is this the "right" approach. Nothing against the Wellington fund, I'm just looking to keep it simple. Also, the ER for Total Stock Market is less at .15%, so I thought I'd just go with that one.
I guess the flip side would be that if I did pick a fund like the Wellington, then that account would just be on its own, but that isn't what most people advocate on this site. Again, just checking in and trying to learn. Thanks.
Last edited by spdoublebass on Mon Jun 19, 2017 8:00 pm, edited 1 time in total.

mhalley
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Re: Quick question

Post by mhalley » Mon Jun 19, 2017 11:49 am

Wellington is a great fund, but it is actively managed. For a one fund solution, total stack market is fine if you have other accounts to complete your aa. You might also consider a target retirement fund or lifestrategy fund. Those go more along the bogleheads philosophy than Wellington, but there are plenty of happy owners of Wellington here.

spdoublebass
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Re: Quick question

Post by spdoublebass » Mon Jun 19, 2017 11:54 am

mhalley wrote:Wellington is a great fund, but it is actively managed. For a one fund solution, total stack market is fine if you have other accounts to complete your aa. You might also consider a target retirement fund or lifestrategy fund. Those go more along the bogleheads philosophy than Wellington, but there are plenty of happy owners of Wellington here.


Thanks for the reply.

I guess my question should have been. I have a Roth Ira, with 4 funds and am happy. The amount I can put in my Solo 401K will change every year based off of my 1099 income. I didn't know if it would be better to choose a fund like the Wellington, and just let it be, or include it in my AA. I only want to add one fund because of the $20 fee for each fund until I hit the voyager amount. As for the actively managed part, this fund would be my only exception to that rule.
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livesoft
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Re: Quick question

Post by livesoft » Mon Jun 19, 2017 11:59 am

If you only have a Roth IRA and a 401(k), then I would pick a LifeStrategy fund in the 401(k) and not use 4-fund in Roth.

In essence, I don't think your question can have a quick answer. I don't have a Vanguard solo 401(k), but if you have to pay $20 a year, what's up with that? Will that go away when you have $50K? Can it go away by signing up for electronic / paperless statements and docs? Will you want to switch funds later, so it will $20 if you have one fund for 4 months and a different fund for another 2 months? Do you see how this $20 fee is messing with your mind?
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spdoublebass
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Re: Quick question

Post by spdoublebass » Mon Jun 19, 2017 12:06 pm

livesoft wrote:If you only have a Roth IRA and a 401(k), then I would pick a LifeStrategy fund in the 401(k) and not use 4-fund in Roth.

In essence, I don't think your question can have a quick answer. I don't have a Vanguard solo 401(k), but if you have to pay $20 a year, what's up with that? Will that go away when you have $50K? Can it go away by signing up for electronic / paperless statements and docs? Will you want to switch funds later, so it will $20 if you have one fund for 4 months and a different fund for another 2 months? Do you see how this $20 fee is messing with your mind?


The $20 fee per fund cannot go away with electronic statements. It goes away when you hit 50K across all your accounts. Normally I would have went somewhere else for the Solo 401k to save money, but for simplicity I stayed with Vanguard. This is why i only wanted to pick one fund for now.

I will eventually have a 401K through an employer, just not right now.

I see what you are saying though, that the lifeStrategy funds solve the problem. I never thought about that part of it. But It also isn't that hard to just pick Total Stock Market either.
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gkaplan
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Re: Quick question

Post by gkaplan » Mon Jun 19, 2017 7:56 pm

OP, you would likely get more responses to your question if you edit your thread title to indicate your specific question.
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spdoublebass
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Re: Quick question

Post by spdoublebass » Mon Jun 19, 2017 8:00 pm

gkaplan wrote:OP, you would likely get more responses to your question if you edit your thread title to indicate your specific question.


Changed. Thanks
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aristotelian
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Re: Which fund for Solo 401K

Post by aristotelian » Mon Jun 19, 2017 8:16 pm

Yes, you may absolutely own the same fund in your 401k as your Roth, as long as it is internally diversified and low expense and you have sufficient diversification in the rest of your portfolio.

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saltycaper
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Re: Which fund for Solo 401K

Post by saltycaper » Mon Jun 19, 2017 9:56 pm

I would just pick one of the funds I already hold in the Roth IRA.

This might be the one with the smallest Investor-class ER or perhaps more sensibly the one with the smallest difference between Admiral and Investor shares.

Or, if you didn't elect the Roth option for the Solo 401k, decide by considering which fund you'd rather have in a tax-deferred account (the Solo 401k) versus a Roth account, perhaps including the impacts of tax-adjusted asset allocation. (Though I wouldn't get too caught up in this because so much is unknown. I myself don't figure exact amounts.)

I would avoid adding a new fund or fund-of-funds just because this account will only have one fund. That is not a path I would go down. Imagine you might have even more accounts in the future. It's good practice IMO to get used to looking at everything as one portfolio, even though all funds don't reside in the same account.
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spdoublebass
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Re: Which fund for Solo 401K

Post by spdoublebass » Mon Jun 19, 2017 10:27 pm

saltycaper wrote:I would just pick one of the funds I already hold in the Roth IRA.

This might be the one with the smallest Investor-class ER or perhaps more sensibly the one with the smallest difference between Admiral and Investor shares.

Or, if you didn't elect the Roth option for the Solo 401k, decide by considering which fund you'd rather have in a tax-deferred account (the Solo 401k) versus a Roth account, perhaps including the impacts of tax-adjusted asset allocation. (Though I wouldn't get too caught up in this because so much is unknown. I myself don't figure exact amounts.)

I would avoid adding a new fund or fund-of-funds just because this account will only have one fund. That is not a path I would go down. Imagine you might have even more accounts in the future. It's good practice IMO to get used to looking at everything as one portfolio, even though all funds don't reside in the same account.


I appreciate the response. I think you are spot on. I called Vanguard earlier today and it's easy to switch it out of the Wellington fund. You are also right about the ER. I think I'll go with Total Stock Market because it's the lowest ER (of the 4 ETF's I have in my Roth) at .15 ER then at 10K will drop to .04. The way the accounts are linked it's easy to keep track of everything. I'm still early stages in all of this but when I hit 50K total across all accounts they wave the $20 fee as well.

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saltycaper
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Re: Which fund for Solo 401K

Post by saltycaper » Mon Jun 19, 2017 10:50 pm

spdoublebass wrote:
I think I'll go with Total Stock Market because it's the lowest ER (of the 4 ETF's I have in my Roth) at .15 ER then at 10K will drop to .04.


I don't think you can hold Admiral shares in a Vanguard Solo 401k, unless Vanguard changed this policy recently. If they still have that policy, that means you're stuck paying the Investor-class ER no matter how much money you have in the Solo 401k. (When I opened the account, the application said not to list Admiral shares.) I have a Solo 401k with Vanguard, and this irritates me, but I went with them because I wanted the Roth option they offered. I think wanting to have your accounts in one place also is a valid reason to suffer the small extra expense, especially if just starting out.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

John Laurens
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Re: Which fund for Solo 401K

Post by John Laurens » Tue Jun 20, 2017 11:35 am

I would never hold anything other than a life strategy or TR fund in a Vanguard i401k. Imagine when you have 500k+ in total US stock market yet you are paying 0.15%. At least with LS and TR funds you are getting a value added service.

Regards,
John

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saltycaper
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Re: Which fund for Solo 401K

Post by saltycaper » Tue Jun 20, 2017 12:15 pm

^Those funds use Investor-share classes too, so there's not really any savings. The value-add could be negative, as asset allocation (stock/bond, int'l/domestic) is now dependent on what Vanguard decides--they've changed LS fund composition in the past and TR glidepath--and it makes it more difficult to re-balance in other accounts if any investments are held elsewhere.

If one has 500K in a Solo 401k, I think it should be held somewhere other than Vanguard. A difference of, say, 0.08 in ER, is something like $400 a year on 500k.
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spdoublebass
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Re: Which fund for Solo 401K

Post by spdoublebass » Tue Jun 20, 2017 12:28 pm

John Laurens wrote:I would never hold anything other than a life strategy or TR fund in a Vanguard i401k. Imagine when you have 500k+ in total US stock market yet you are paying 0.15%. At least with LS and TR funds you are getting a value added service.

Regards,
John


Most LS and TR's are .15 or .16. The range right now is .12-.16 that's pretty close to Total Stock Market's .15
And by the time my account grows that much....these ER's will be much different.
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John Laurens
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Re: Which fund for Solo 401K

Post by John Laurens » Tue Jun 20, 2017 12:54 pm

I have 7 figure solo 401k. I would love to have it at vanguard, but I'm not paying 0.15% for a total US stock fund while any other account at vanguard allows admiral shares 0.04% for 10k minimum. Hence, I have my solo401k at TDA.

At least for the OP since he chose vanguard as his solo 401k provider, I would choose a TR or LS fund. At least you are getting "what you paid for" and not being punished for archaic plan setup.

Regards,
John

spdoublebass
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Re: Which fund for Solo 401K

Post by spdoublebass » Tue Jun 20, 2017 1:05 pm

John Laurens wrote:I have 7 figure solo 401k. I would love to have it at vanguard, but I'm not paying 0.15% for a total US stock fund while any other account at vanguard allows admiral shares 0.04% for 10k minimum. Hence, I have my solo401k at TDA.

At least for the OP since he chose vanguard as his solo 401k provider, I would choose a TR or LS fund. At least you are getting "what you paid for" and not being punished for archaic plan setup.

Regards,
John


I posted the Op.
I know what you mean and am not disagreeing with you. This fund will not be my only 401K and this fund will probably not have that much in it because my 1099 income isn't that high. However, the target retirement account I'd use would be a basis point higher, probably for a while (over 20 years). I just figure it's simple to choose my cheapest fund held in my AA and go from there. Which would be cheaper then a TR of LS
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