Best Solo 401k Brokerage for Three Fund Portfolio

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keyfort
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Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Wed May 22, 2019 6:50 pm

I realize this question has been asked a lot, but if I specifically just want to hold the three fund portfolio in ETFs or Mutual Funds (don't mind which) in a new solo 401k, which brokerage would you recommend as the best for this? (This account would be to buy and hold for at least 25 years).

I think my priorities for the brokerage would be, in descending order from most important first:

1. Low fees
2. Ability to meet in person at a local branch + customer service
3. Safety and security
4. The rest: ability to take loan, roth, rollovers etc

What do you think? I was leaning towards TD Ameritrade, but noticed they now charge for Vanguard ETFs apparently. Is it a per trade fee?

So now I'm thinking maybe Fidelity..

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Duckie
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Duckie » Wed May 22, 2019 7:16 pm

keyfort wrote:I was leaning towards TD Ameritrade, but noticed they now charge for Vanguard ETFs apparently. Is it a per trade fee?
Yes, it is a per-trade fee. TD Ameritrade has some commission-free ETFs. (Click on the category then the net expense ratio to get the lowest cost options on top.) Three good ones are SPTM (total US stocks), SPDW (developed markets stocks), and SPAB (US bonds).
So now I'm thinking maybe Fidelity..
Fidelity does not have Roth solo 401k accounts.

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Wed May 22, 2019 7:22 pm

Duckie wrote:
Wed May 22, 2019 7:16 pm
keyfort wrote:I was leaning towards TD Ameritrade, but noticed they now charge for Vanguard ETFs apparently. Is it a per trade fee?
Yes, it is a per-trade fee. TD Ameritrade has some commission-free ETFs. (Click on the category then the net expense ratio to get the lowest cost options on top.) Three good ones are SPTM (total US stocks), SPDW (developed markets stocks), and SPAB (US bonds).
So now I'm thinking maybe Fidelity..
Fidelity does not have Roth solo 401k accounts.
The loan and roth options are low down on my priorities. I mean you never know, but right now I don't see them as something I'll use, for various reasons.

Thank you for the link, that's really handy. Forgive my ignorance, but how can I tell who the ETF is by? Like VTI is Vanguard, but who created SPTM?

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southerndoc
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by southerndoc » Wed May 22, 2019 7:41 pm

https://thecollegeinvestor.com/18174/co ... k-options/

Roth eliminates Fidelity. Local branches eliminates Vanguard. Loans eliminates Fidelity, Vanguard, and Schwab. Leaves you E-Trade and TDAmeritrade.

tesuzuki2002
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by tesuzuki2002 » Wed May 22, 2019 7:49 pm

Fidelity.

lakpr
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by lakpr » Wed May 22, 2019 7:51 pm

SPTM, SPDW and SPAB are ETFs by State Street Global Advisors

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AerialWombat
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by AerialWombat » Wed May 22, 2019 7:56 pm

I went through the same thing a year ago. I chose eTrade. No account fees, only $4.95 trades on stocks/ETFs. They have dozens of commission-free Vanguard ETFs and no-fee Vanguard funds, including all your “usual suspects” for a 3-fund.
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keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Wed May 22, 2019 10:49 pm

Thanks for the information everyone. It's really appreciated.

Glad to hear E-Trade is good. Just had a look and see that like you say they have VTI available comission free. Sounds promising.

jacoavlu
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by jacoavlu » Wed May 22, 2019 11:17 pm

you could construct a fine three fund portfolio of low fee index funds or ETFs at any of the major players, I would argue that your priorities are mixed up, you really should decide based on whether you may ever want ability to make Roth elective contributions (eliminates Fidelity and Schwab I think) and whether you may need for your plan to accept a rollover (eliminates Vanguard). These are important considerations.

your criteria #2 eliminates many if not all of the players because even if you go into a local branch of those that have them odds are slim I'd guess that the person there is really going to be able to give you excellent advice specifically with regards to your solo 401k. It's just a niche product and there are knowledgeable people that you can reach on the phone.

Etrade probably has the best free solo 401k available.

Luckywon
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Luckywon » Wed May 22, 2019 11:24 pm

My individual 401k is at Etrade and I've been very happy with them. Was able to roll over a 403b into the account. Very wide selection of funds-I don't think there are any restrictions on what can be bought.

No mega backdoor Roth option but none of the boilerplate brokerage 401k plans allow those, to my knowledge

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keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Thu May 23, 2019 3:37 am

jacoavlu wrote:
Wed May 22, 2019 11:17 pm
you could construct a fine three fund portfolio of low fee index funds or ETFs at any of the major players, I would argue that your priorities are mixed up, you really should decide based on whether you may ever want ability to make Roth elective contributions (eliminates Fidelity and Schwab I think) and whether you may need for your plan to accept a rollover (eliminates Vanguard). These are important considerations.

your criteria #2 eliminates many if not all of the players because even if you go into a local branch of those that have them odds are slim I'd guess that the person there is really going to be able to give you excellent advice specifically with regards to your solo 401k. It's just a niche product and there are knowledgeable people that you can reach on the phone.

Etrade probably has the best free solo 401k available.
Thanks for this.

I'm not sure how to know for sure if I'll want to make Roth contributions. They count to the same 2019 $56,000 limit is that correct? They seem less useful if you have a high income currently but I'm not sure.

livesoft
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by livesoft » Thu May 23, 2019 5:53 am

As hinted at, a 3 fund portfolio does not need to use vanguard products.

I've had a TDameritrade solo.401k for a few years now without issues and can recommend them.
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ruralavalon
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by ruralavalon » Thu May 23, 2019 4:45 pm

keyfort wrote:
Wed May 22, 2019 6:50 pm
I realize this question has been asked a lot, but if I specifically just want to hold the three fund portfolio in ETFs or Mutual Funds (don't mind which) in a new solo 401k, which brokerage would you recommend as the best for this? (This account would be to buy and hold for at least 25 years).

I think my priorities for the brokerage would be, in descending order from most important first:

1. Low fees
2. Ability to meet in person at a local branch + customer service
3. Safety and security
4. The rest: ability to take loan, roth, rollovers etc

What do you think? I was leaning towards TD Ameritrade, but noticed they now charge for Vanguard ETFs apparently. Is it a per trade fee?

So now I'm thinking maybe Fidelity..
No one meets all of your criteria.

Fidelity has local offices in some cities and Ii looks like Fidelity would meet most of your criteria, except they do not allow Roth contributions and loans. Vanguard does not have local customer service offices, and they allow Roth contributions but not loans. A Fidelity plan will accept rollovers, a Vanguard ln will not.

Vanguard, small-business plans,"Compare plans". That link has a nice table stating the features of their individual (solo) 401k. Both Fidelity and Schwab also offer the individual (solo) 401k plans. Fidelity "Retirement plans for small businesses ". Schwab, "Small business retirement plans".

The College Investor (12/11/2017), "Comparing The Most Popular Solo 401k Options".

The Bogleheads' wiki has an article on individual (solo) 401k plans. Boglehead's wiki, "Solo 401k Plan".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Thu May 23, 2019 5:01 pm

ruralavalon wrote:
Thu May 23, 2019 4:45 pm
keyfort wrote:
Wed May 22, 2019 6:50 pm
I realize this question has been asked a lot, but if I specifically just want to hold the three fund portfolio in ETFs or Mutual Funds (don't mind which) in a new solo 401k, which brokerage would you recommend as the best for this? (This account would be to buy and hold for at least 25 years).

I think my priorities for the brokerage would be, in descending order from most important first:

1. Low fees
2. Ability to meet in person at a local branch + customer service
3. Safety and security
4. The rest: ability to take loan, roth, rollovers etc

What do you think? I was leaning towards TD Ameritrade, but noticed they now charge for Vanguard ETFs apparently. Is it a per trade fee?

So now I'm thinking maybe Fidelity..
No one meets all of your criteria.

Fidelity has local offices in some cities and Ii looks like Fidelity would meet most of your criteria, except they do not allow Roth contributions and loans. Vanguard does not have local customer service offices, and they allow Roth contributions but not loans. A Fidelity plan will accept rollovers, a Vanguard ln will not.

Vanguard, small-business plans,"Compare plans". That link has a nice table stating the features of their individual (solo) 401k. Both Fidelity and Schwab also offer the individual (solo) 401k plans. Fidelity "Retirement plans for small businesses ". Schwab, "Small business retirement plans".

The College Investor (12/11/2017), "Comparing The Most Popular Solo 401k Options".

The Bogleheads' wiki has an article on individual (solo) 401k plans. Boglehead's wiki, "Solo 401k Plan".
Thank you. Looked through all and seems like E-Trade will be closest to what I need.

But on the Roth contributions: I'm not sure how these are useful in my case. Both Roth and normal solo 401k contributions count towards the overall $56,000 limit is that right? If you have a high income now and expect it to be less in retirement, roth contributions are not worthwhile as far as I can see - is that right too?

lkar
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by lkar » Thu May 23, 2019 5:14 pm

keyfort wrote:
Thu May 23, 2019 5:01 pm
Thank you. Looked through all and seems like E-Trade will be closest to what I need.

But on the Roth contributions: I'm not sure how these are useful in my case. Both Roth and normal solo 401k contributions count towards the overall $56,000 limit is that right? If you have a high income now and expect it to be less in retirement, roth contributions are not worthwhile as far as I can see - is that right too?
My wife has a very small business that generates a small bit of income each year. Tiny amounts, but still. She opened a solo 401k at ETrade and we rolled an IRA from a prior job that she had into it. We opened it mostly so that she could get rid of that IRA and start to do backdoor Roth conversions without pro-rata aggregation. But it's also nice to be able to put any income she gets from the business -- which is way under her contribution limit -- into the solo 401k.

When we opened it we opened it only as a solo 401k without an accompanying roth option in the plan. Now, ironically, we find that we may want to do some Roth conversions in the next few years. (Which are confusingly called "rollovers" when done within a solo 401k plan.)

Long winded way of saying that you never know whether you're going to want to have a Roth option in a solo 401k. It was a hassle amending the plan to include the Roth option. ETrade is really on top of its game with solo 401ks and it has some very knowledgeable people at the call center to help with them. So we were happy we selected ETrade, but even with all the assistance, amending a plan is a hassle and something that you don't want to do if you don't have to. So, even if you think you'll never use it, I don't think there's a downside to setting up a Roth option in your plan when you set up your solo 401k.

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Duckie
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Duckie » Thu May 23, 2019 5:51 pm

keyfort wrote:But on the Roth contributions: I'm not sure how these are useful in my case. Both Roth and normal solo 401k contributions count towards the overall $56,000 limit is that right?
Both pre-tax and Roth employEE contributions count toward the $19K limit. Pre-tax, Roth, and after-tax employEE contributions, plus the ~20% employER contributions, count toward the $56K limit.
If you have a high income now and expect it to be less in retirement, roth contributions are not worthwhile as far as I can see - is that right too?
For most people, yes, pre-tax is better. But some people expect to have pensions in retirement and that might change things.

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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by ruralavalon » Thu May 23, 2019 5:53 pm

keyfort wrote:
Thu May 23, 2019 5:01 pm
Thank you. Looked through all and seems like E-Trade will be closest to what I need.
I would not have expected E*Trade to be as good as they seem to be. Take a close look at the ETFs available there to be sure they meet your preferences at low cost.


keyfort wrote:
Thu May 23, 2019 5:01 pm
But on the Roth contributions: I'm not sure how these are useful in my case. Both Roth and normal solo 401k contributions count towards the overall $56,000 limit is that right? If you have a high income now and expect it to be less in retirement, roth contributions are not worthwhile as far as I can see - is that right too?
If you expect to have less income in retirement then traditional 401k contributions are likely better. But that is not always easy to predict, as ikar said "you never know". Most of your Social Security is taxable and any withdrawal from a traditional 401k is taxable income. For most people traditional 401k contributions will likely be better.

The income tax code is progressive, with a lower tax rate for lower income. Retirement usually means that employment income has ended. Therefore, most people are in a lower tax bracket in retirement and for most people traditional 401k contributions will probably be better. In addition when you withdraw from your 401k in retirement, your income is not all taxed at your marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". "I think for most people the majority, if not 100%, of the contribution should go to a Traditional 401(k)."

"Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn’t make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth."

Wiki article, "Traditional vs Roth".
"Tax considerations:
* If your current marginal tax rate is 15% or less, prefer a Roth.
* If you expect to have higher marginal rates than your current marginal rate for most of your career, prefer a Roth.
* If you will have a traditional account or a pension large enough to meet your expected retirement expenses (and you expect to take that pension shortly after retiring), prefer a Roth.
* Otherwise, prefer a traditional account."
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Thu May 23, 2019 6:41 pm

ruralavalon wrote:
Thu May 23, 2019 5:53 pm
I would not have expected E*Trade to be as good as they seem to be. Take a close look at the ETFs available there to be sure they meet your preferences at low cost.
Thank you for all your advice. Wanted to ask you why you wouldn't have expected E*Trade to be as good as they seem - is there something bad about them compared to others?

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keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Thu May 23, 2019 6:44 pm

lkar wrote:
Thu May 23, 2019 5:14 pm
My wife has a very small business that generates a small bit of income each year. Tiny amounts, but still. She opened a solo 401k at ETrade and we rolled an IRA from a prior job that she had into it. We opened it mostly so that she could get rid of that IRA and start to do backdoor Roth conversions without pro-rata aggregation. But it's also nice to be able to put any income she gets from the business -- which is way under her contribution limit -- into the solo 401k.

When we opened it we opened it only as a solo 401k without an accompanying roth option in the plan. Now, ironically, we find that we may want to do some Roth conversions in the next few years. (Which are confusingly called "rollovers" when done within a solo 401k plan.)

Long winded way of saying that you never know whether you're going to want to have a Roth option in a solo 401k. It was a hassle amending the plan to include the Roth option. ETrade is really on top of its game with solo 401ks and it has some very knowledgeable people at the call center to help with them. So we were happy we selected ETrade, but even with all the assistance, amending a plan is a hassle and something that you don't want to do if you don't have to. So, even if you think you'll never use it, I don't think there's a downside to setting up a Roth option in your plan when you set up your solo 401k.
Duckie wrote:
Thu May 23, 2019 5:51 pm
Both pre-tax and Roth employEE contributions count toward the $19K limit. Pre-tax, Roth, and after-tax employEE contributions, plus the ~20% employER contributions, count toward the $56K limit.
If you have a high income now and expect it to be less in retirement, roth contributions are not worthwhile as far as I can see - is that right too?
For most people, yes, pre-tax is better. But some people expect to have pensions in retirement and that might change things.
Thank you both for such detailed information and explanations.

I do find the terminology slightly confusing regarding rollovers as it seems to have a few significantly different meanings depending on context.

Is a rollover from a solo 401k to a roth solo 401k roughly as follows: moving the funds from traditional to the roth and paying tax as if it's income that year, but then being able to take it out in retirement tax free?

SonnyDMB
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by SonnyDMB » Thu May 23, 2019 7:07 pm

My understanding is the new 199a qbi deduction is a reason Roth May make sense Vs traditional 401k contribution. Depends on the details of course and various aspects of an Individual scenario to assess.

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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by bada bing » Fri May 24, 2019 1:25 am

I went through a similar search 5 years ago when I opened a Solo401K. At the time I had other accounts
opened at Fidelity, Schwab, TdAmeritrade and Vanguard, so I limited my investigation to them. A couple
opinion comments:

1. I wouldn't prioritize "three fund" friendliness very high, or at all. The differences with respect to what
is available at any of them to construct a 3 fund portfolio varies almost not at all, from best to worst. As
an example, my solo401k is invested in Vanguard ETFs, but is not held at Vanguard. Enough free trades sufficient
to buy what you need are available at any of them pretty much for the asking, given a moderate balance.

2. An important aspect you haven't mentioned is the relative competence of the brokerage's customer service.
Setting up and maintaining a solo401K isn't rocket science, but it is more complex than an IRA or taxable
brokerage account. To that end, I found that Schwab seems to have solo401K's as more of a core business target
than the others I looked at. I ended up going with Schwab, based on judgement about the competence of the
customer service agents they have for small business retirement accounts. I wasn't disappointed. My solo401K
setup involved rolling in monies from other qualified plans (401K and IRA) and created an account with >$250K.
Solo401Ks over $250K have annual reporting requirements, which again isn't rocket science, but is something
you don't want to screw up.

In particular (and this will ruffle a few fanbois), I would avoid Vanguard as a custodian for a Solo401K. It is rather
obvious from checking their plans construction that they really have solo401K's as an afterthought. The big downer
is prohibiting IRA roll ins, which should have been a no-brainer if they actually wanted the business.

Spirit Rider
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Spirit Rider » Fri May 24, 2019 7:04 am

keyfort wrote:
Thu May 23, 2019 6:44 pm
I do find the terminology slightly confusing regarding rollovers as it seems to have a few significantly different meanings depending on context.
You are correct. It is called a Roth conversion when you rollover a traditional IRA to a Roth IRA, but an In-plan Roth Rollover IRR when you rollover a traditional 401k and/or after-tax 401k to a Roth 401k at the same 401k plan. Yet, they are both technically the same taxable rollover of pre-tax/after-tax assets to a Roth post-tax account.
Is a rollover from a solo 401k to a roth solo 401k roughly as follows: moving the funds from traditional to the roth and paying tax as if it's income that year, but then being able to take it out in retirement tax free?
Yes, subject to the qualification rules.

Note: ETrade is unique among the mainstream low cost one-participant 401k providers. They are the only ones offering IRRs. Your only other choices are to pay for a custom plan document and self-administer the plan or hire a TPA.

Luckywon
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Luckywon » Fri May 24, 2019 8:31 am

Spirit Rider wrote:
Fri May 24, 2019 7:04 am


Note: ETrade is unique among the mainstream low cost one-participant 401k providers. They are the only ones offering IRRs. Your only other choices are to pay for a custom plan document and self-administer the plan or hire a TPA.
I have my individual 401k at Etrade. Although they allow IRR's, they do not allow after tax contributions, so the "mega backdoor Roth" option is not available there, unless your 401k at Etrade is actually being administered by a third party with a custom plan document. At least, that is what I was told by Etrade as recently as last August.

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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by RickBoglehead » Fri May 24, 2019 8:35 am

keyfort wrote:
Wed May 22, 2019 6:50 pm
I realize this question has been asked a lot, but if I specifically just want to hold the three fund portfolio in ETFs or Mutual Funds (don't mind which) in a new solo 401k, which brokerage would you recommend as the best for this? (This account would be to buy and hold for at least 25 years).

I think my priorities for the brokerage would be, in descending order from most important first:

1. Low fees
2. Ability to meet in person at a local branch + customer service
3. Safety and security
4. The rest: ability to take loan, roth, rollovers etc

What do you think? I was leaning towards TD Ameritrade, but noticed they now charge for Vanguard ETFs apparently. Is it a per trade fee?

So now I'm thinking maybe Fidelity..
I'm confused. If you're going to hold a simple 3 fund portfolio, why do you need to meet with anyone?

I have my solo 401k at Vanguard, it allows ROTH investments also. Works for me, but I'm not looking to roll anything over to it, take out loans from it, etc.
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Spirit Rider » Fri May 24, 2019 9:02 am

Luckywon wrote:
Fri May 24, 2019 8:31 am
Spirit Rider wrote:
Fri May 24, 2019 7:04 am


Note: ETrade is unique among the mainstream low cost one-participant 401k providers. They are the only ones offering IRRs. Your only other choices are to pay for a custom plan document and self-administer the plan or hire a TPA.
I have my individual 401k at Etrade. Although they allow IRR's, they do not allow after tax contributions, so the "mega backdoor Roth" option is not available there, unless your 401k at Etrade is actually being administered by a third party with a custom plan document. At least, that is what I was told by Etrade as recently as last August.
Yes, that is true, but we were not talking about the Mega Backdoor Roth. Etrade's availability of IRRs for traditional 401k employee/employer contributions and rollover contributions, is valuable in it's own right.

Luckywon
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Luckywon » Fri May 24, 2019 10:05 am

Spirit Rider wrote:
Fri May 24, 2019 9:02 am
Luckywon wrote:
Fri May 24, 2019 8:31 am
Spirit Rider wrote:
Fri May 24, 2019 7:04 am


Note: ETrade is unique among the mainstream low cost one-participant 401k providers. They are the only ones offering IRRs. Your only other choices are to pay for a custom plan document and self-administer the plan or hire a TPA.
I have my individual 401k at Etrade. Although they allow IRR's, they do not allow after tax contributions, so the "mega backdoor Roth" option is not available there, unless your 401k at Etrade is actually being administered by a third party with a custom plan document. At least, that is what I was told by Etrade as recently as last August.
Yes, that is true, but we were not talking about the Mega Backdoor Roth. Etrade's availability of IRRs for traditional 401k employee/employer contributions and rollover contributions, is valuable in it's own right.
Yes, thanks. fully agree Etrade is a good choice as an individual 401k provider.

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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by ruralavalon » Fri May 24, 2019 10:26 am

keyfort wrote:
Thu May 23, 2019 6:41 pm
ruralavalon wrote:
Thu May 23, 2019 5:53 pm
I would not have expected E*Trade to be as good as they seem to be. Take a close look at the ETFs available there to be sure they meet your preferences at low cost.
Thank you for all your advice. Wanted to ask you why you wouldn't have expected E*Trade to be as good as they seem - is there something bad about them compared to others?
No, I don't know anything bad about E*Trade. It's just that E*Trade is not discussed much here compared to Vanguard, Fidelity, Schwab, Merrill Edge, etc. I know little about E*Trade.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Spirit Rider » Fri May 24, 2019 12:01 pm

ruralavalon wrote:
Fri May 24, 2019 10:26 am
keyfort wrote:
Thu May 23, 2019 6:41 pm
Thank you for all your advice. Wanted to ask you why you wouldn't have expected E*Trade to be as good as they seem - is there something bad about them compared to others?
No, I don't know anything bad about E*Trade. It's just that E*Trade is not discussed much here compared to Vanguard, Fidelity, Schwab, Merrill Edge, etc. I know little about E*Trade.
Many people including myself prefer mutual index funds for retirement accounts. That means Fidelity, Schwab or Vanguard. However, Vanguard does not allow rollover contributions and Fidelity and Schwab do not offer designated Roth accounts.

This primarily left Etrade and TD Ameritrade if you want rollover contributions, ETFs and designated Roth accounts. TD Ameritrade had a strong following because they originally offered most Vanguard ETFs commission free. However, the IRR feature to me is a distinct advantage of Etrade.

lkar
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by lkar » Fri May 24, 2019 12:44 pm

SonnyDMB wrote:
Thu May 23, 2019 7:07 pm
My understanding is the new 199a qbi deduction is a reason Roth May make sense Vs traditional 401k contribution. Depends on the details of course and various aspects of an Individual scenario to assess.
Yep. This was the case for us and the reason we ended up amending our ETrade solo 401k to include a Roth option in the plan.

The 199A deduction makes it a little more expensive (relatively) to do a pre-tax contribution to retirement for certain taxpayers. You limit 199A deduction now and you pay tax on the full amount of the contribution later.

Relatedly, for certain taxpayers whose income is mostly qualified business income, adding taxable income can increase the deduction. (Weird, I know.) Some (like me) are thinking that the opportunity to add income in the form of Roth conversions is a potential way to increase diversity in retirement accounts between pre- and post-tax at a rate that seems like it could be pretty good as compared to tax rate in retirement.
Last edited by lkar on Fri May 24, 2019 2:46 pm, edited 2 times in total.

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Fri May 24, 2019 12:53 pm

Spirit Rider wrote:
Fri May 24, 2019 12:01 pm
ruralavalon wrote:
Fri May 24, 2019 10:26 am
keyfort wrote:
Thu May 23, 2019 6:41 pm
Thank you for all your advice. Wanted to ask you why you wouldn't have expected E*Trade to be as good as they seem - is there something bad about them compared to others?
No, I don't know anything bad about E*Trade. It's just that E*Trade is not discussed much here compared to Vanguard, Fidelity, Schwab, Merrill Edge, etc. I know little about E*Trade.
Many people including myself prefer mutual index funds for retirement accounts. That means Fidelity, Schwab or Vanguard. However, Vanguard does not allow rollover contributions and Fidelity and Schwab do not offer designated Roth accounts.

This primarily left Etrade and TD Ameritrade if you want rollover contributions, ETFs and designated Roth accounts. TD Ameritrade had a strong following because they originally offered most Vanguard ETFs commission free. However, the IRR feature to me is a distinct advantage of Etrade.
Thank you. I think I saw that TD Ameritrade removed Vanguard ETFs from their free list?

I wonder if Rollovers are useful in my situation - I have no other retirement accounts whatsoever. No IRAs, no 401ks etc. Do I still need the ability to Rollover? If there are no Rollovers does that mean that I can't transfer the account away to another provider later either?

I'm a bit confused on one thing - how come people prefer mutual index funds for retirement accounts? Are the returns on average better?

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Fri May 24, 2019 12:58 pm

RickBoglehead wrote:
Fri May 24, 2019 8:35 am

I'm confused. If you're going to hold a simple 3 fund portfolio, why do you need to meet with anyone?

I have my solo 401k at Vanguard, it allows ROTH investments also. Works for me, but I'm not looking to roll anything over to it, take out loans from it, etc.
It's really just personal taste. I prefer to have a local contact in case of any issues.
Last edited by keyfort on Fri May 24, 2019 1:00 pm, edited 1 time in total.

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Fri May 24, 2019 1:00 pm

Spirit Rider wrote:
Fri May 24, 2019 7:04 am
keyfort wrote:
Thu May 23, 2019 6:44 pm
I do find the terminology slightly confusing regarding rollovers as it seems to have a few significantly different meanings depending on context.
You are correct. It is called a Roth conversion when you rollover a traditional IRA to a Roth IRA, but an In-plan Roth Rollover IRR when you rollover a traditional 401k and/or after-tax 401k to a Roth 401k at the same 401k plan. Yet, they are both technically the same taxable rollover of pre-tax/after-tax assets to a Roth post-tax account.
Is a rollover from a solo 401k to a roth solo 401k roughly as follows: moving the funds from traditional to the roth and paying tax as if it's income that year, but then being able to take it out in retirement tax free?
Yes, subject to the qualification rules.

Note: ETrade is unique among the mainstream low cost one-participant 401k providers. They are the only ones offering IRRs. Your only other choices are to pay for a custom plan document and self-administer the plan or hire a TPA.
Thank you for this too.

There is one thing which I don't understand in the terminology: "After-tax 401k". Is this not the same as a Roth 401k?

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Wiggums
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by Wiggums » Fri May 24, 2019 1:02 pm

Pre-tax contribution is the amount of deductions you make from your monthly gross wage into your 401k retirement savings account, BEFORE taxes have been deducted. By making pre-tax contributions, you are lowering your current taxable income. ... Your after-tax 401k contributions are therefore $10,000.

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ruralavalon
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by ruralavalon » Fri May 24, 2019 1:45 pm

keyfort wrote:
Fri May 24, 2019 12:53 pm
Spirit Rider wrote:
Fri May 24, 2019 12:01 pm
ruralavalon wrote:
Fri May 24, 2019 10:26 am
keyfort wrote:
Thu May 23, 2019 6:41 pm
Thank you for all your advice. Wanted to ask you why you wouldn't have expected E*Trade to be as good as they seem - is there something bad about them compared to others?
No, I don't know anything bad about E*Trade. It's just that E*Trade is not discussed much here compared to Vanguard, Fidelity, Schwab, Merrill Edge, etc. I know little about E*Trade.
Many people including myself prefer mutual index funds for retirement accounts. That means Fidelity, Schwab or Vanguard. However, Vanguard does not allow rollover contributions and Fidelity and Schwab do not offer designated Roth accounts.

This primarily left Etrade and TD Ameritrade if you want rollover contributions, ETFs and designated Roth accounts. TD Ameritrade had a strong following because they originally offered most Vanguard ETFs commission free. However, the IRR feature to me is a distinct advantage of Etrade.
Thank you. I think I saw that TD Ameritrade removed Vanguard ETFs from their free list?
That is correct.


keyfort wrote:
Fri May 24, 2019 12:53 pm
I wonder if Rollovers are useful in my situation - I have no other retirement accounts whatsoever. No IRAs, no 401ks etc. Do I still need the ability to Rollover? If there are no Rollovers does that mean that I can't transfer the account away to another provider later either?
Since you have no other accounts the ability to rollover an account into the individual (solo) 401k will not matter at all.

That will not affect the ability to roll the individual (solo) 401k over into some other plan later.


keyfort wrote:
Fri May 24, 2019 12:53 pm
I'm a bit confused on one thing - how come people prefer mutual index funds for retirement accounts? Are the returns on average better?
The returns are not better.

Its mostly a matter of personal preference.

I prefer traditional mutual funds rather than Exchange Traded Funds (ETFs) because you can buy or sell fractional shares, trading mechanics are simpler, and it's easy to set up automatic investments, and easy to set up automatic reinvestment of dividends and gains. Wiki article, "ETFs vs Mutual Funds".
Last edited by ruralavalon on Fri May 24, 2019 1:52 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

lkar
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by lkar » Fri May 24, 2019 1:52 pm

keyfort wrote:
Fri May 24, 2019 1:00 pm
Thank you for this too.

There is one thing which I don't understand in the terminology: "After-tax 401k". Is this not the same as a Roth 401k?
It has gotten complicated. It is possible to make contributions to 401k plans with after tax dollars that are not Roth contributions. This is not an option that was really all that popular generally to your average investor even a few years ago, but now is getting more popular. More 401k plans are starting to allow for it.

So, and this is oversimplifying greatly, there are three types of contributions that can be made to a 401k. Each comes with its own advantages and disadvantages and rules. First are pre-tax contributions. Generally speaking you pay tax on these and the earnings on these when you take them out. Second are Roth contributions. Generally speaking, when you withdraw you pay no tax on the contributions and under current law no tax on the earnings so long as all the qualification requirements are met. Third are after-tax contributions. These are contributions for which you do not get a tax deduction when made. You can withdraw the contributions without paying tax. The earnings however are subject to tax. Unless you convert the after-tax contributions to a Roth!

jacoavlu
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by jacoavlu » Fri May 24, 2019 2:09 pm

Spirit Rider wrote:
Fri May 24, 2019 12:01 pm
ruralavalon wrote:
Fri May 24, 2019 10:26 am
keyfort wrote:
Thu May 23, 2019 6:41 pm
Thank you for all your advice. Wanted to ask you why you wouldn't have expected E*Trade to be as good as they seem - is there something bad about them compared to others?
No, I don't know anything bad about E*Trade. It's just that E*Trade is not discussed much here compared to Vanguard, Fidelity, Schwab, Merrill Edge, etc. I know little about E*Trade.
Many people including myself prefer mutual index funds for retirement accounts. That means Fidelity, Schwab or Vanguard. However, Vanguard does not allow rollover contributions and Fidelity and Schwab do not offer designated Roth accounts.

This primarily left Etrade and TD Ameritrade if you want rollover contributions, ETFs and designated Roth accounts. TD Ameritrade had a strong following because they originally offered most Vanguard ETFs commission free. However, the IRR feature to me is a distinct advantage of Etrade.
Etrade now also offers lots of Vanguard mutual funds with no trade fee, including Total US Stock Market and Total Bond Admiral shares. Total International is not there but other International funds are.

You can use their fund screener, select Advanced Screener, fund family = Vanguard, and select no transaction fee to see all that are offered.
https://www.etrade.wallst.com/Research/ ... ct&env=PRD

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Fri May 24, 2019 4:33 pm

ruralavalon wrote:
Fri May 24, 2019 1:45 pm

That is correct.

Since you have no other accounts the ability to rollover an account into the individual (solo) 401k will not matter at all.

That will not affect the ability to roll the individual (solo) 401k over into some other plan later.

The returns are not better.

Its mostly a matter of personal preference.

I prefer traditional mutual funds rather than Exchange Traded Funds (ETFs) because you can buy or sell fractional shares, trading mechanics are simpler, and it's easy to set up automatic investments, and easy to set up automatic reinvestment of dividends and gains. Wiki article, "ETFs vs Mutual Funds".
All extremely helpful - thank you very much.

Topic Author
keyfort
Posts: 92
Joined: Thu Apr 04, 2019 12:46 pm

Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Fri May 24, 2019 4:34 pm

lkar wrote:
Fri May 24, 2019 1:52 pm
keyfort wrote:
Fri May 24, 2019 1:00 pm
Thank you for this too.

There is one thing which I don't understand in the terminology: "After-tax 401k". Is this not the same as a Roth 401k?
It has gotten complicated. It is possible to make contributions to 401k plans with after tax dollars that are not Roth contributions. This is not an option that was really all that popular generally to your average investor even a few years ago, but now is getting more popular. More 401k plans are starting to allow for it.

So, and this is oversimplifying greatly, there are three types of contributions that can be made to a 401k. Each comes with its own advantages and disadvantages and rules. First are pre-tax contributions. Generally speaking you pay tax on these and the earnings on these when you take them out. Second are Roth contributions. Generally speaking, when you withdraw you pay no tax on the contributions and under current law no tax on the earnings so long as all the qualification requirements are met. Third are after-tax contributions. These are contributions for which you do not get a tax deduction when made. You can withdraw the contributions without paying tax. The earnings however are subject to tax. Unless you convert the after-tax contributions to a Roth!
Wow, that is complicated.

The question that immediately comes to mind is: what is the limit for after tax contributions to a solo 401k?!

lkar
Posts: 109
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by lkar » Fri May 24, 2019 4:40 pm

keyfort wrote:
Fri May 24, 2019 4:34 pm

Wow, that is complicated.

The question that immediately comes to mind is: what is the limit for after tax contributions to a solo 401k?!
My understanding is that the only limit on the amount that you can contribute in after tax dollars to a solo 401k is the overall "415" limit for all qualified plan contributions -- which in 2019 will be $56,000 for under 50 and $62,000 for over 50.

(This assumes that the plan allows for after-tax contributions and also assumes that the contributor has sufficient earned income to contribute to the limit.)

Topic Author
keyfort
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by keyfort » Fri May 24, 2019 5:09 pm

lkar wrote:
Fri May 24, 2019 4:40 pm
keyfort wrote:
Fri May 24, 2019 4:34 pm

Wow, that is complicated.

The question that immediately comes to mind is: what is the limit for after tax contributions to a solo 401k?!
My understanding is that the only limit on the amount that you can contribute in after tax dollars to a solo 401k is the overall "415" limit for all qualified plan contributions -- which in 2019 will be $56,000 for under 50 and $62,000 for over 50.

(This assumes that the plan allows for after-tax contributions and also assumes that the contributor has sufficient earned income to contribute to the limit.)
Ah ok, that makes sense. For a second I thought maybe you could contribute more than $56,000!

jacoavlu
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Re: Best Solo 401k Brokerage for Three Fund Portfolio

Post by jacoavlu » Fri May 24, 2019 5:11 pm

After tax contributions are limited to no more than compensation, in addition to being subject to the annual addition limit $56k in 2019. A custom or semi custom plan document is required as none of the mainstream brokerages offer a solo 401k with after tax contributions allowed.

The Finance Buff has an excellent spreadsheet that you can use to run scenarios or enter your own numbers and see how much in after tax contributions would be allowed

https://docs.zoho.com/sheet/published.d ... 140934898a

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