Vanguard solo 401k to allow incoming rollovers?!

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neurosphere
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Vanguard solo 401k to allow incoming rollovers?!

Post by neurosphere »

A physician colleague of mine at work is opening a solo 401k, and researched Fidelty and Vanguard, and she just sent me this email:

"VG said to wait until the end of February. They [negotiated with] the IRS and will be able to rollover [my SEP IRA and rollover IRA] to this solo-401k after new changes around early March."

If true, this is good new for those who would prefer to have their solo 401ks at VG and have need for incoming rollovers, which current plans do not allow. Very curious what will happen to existing 401ks, and if there will be a mechanism to change/modify/transfer/close-and-reopen/whatever the plans to allow incoming rollovers without too much administrative hassle.
Last edited by neurosphere on Fri Feb 12, 2021 11:24 am, edited 1 time in total.
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crystalbank
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by crystalbank »

Wow, big news if this happens. Also terrible timing since I'm in the process of moving my Solo 401k away from Vanguard.
jameskay
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by jameskay »

Thank you very much for sharing this info, neurosphere. I have had it on to do list to move my solo 401K out of vanguard to switch it to etrade since the latter allows rollovers. That in turn would allow me to rollover IRAs into the solo 401k to enable tax free backdoor roths, and also in general to consolidate too many separate retirement accounts DW and I have accumulated over the years. Your news gives enough hope that it is worth waiting a few more weeks to avoid hassle. Let's hope it comes to fruition.

I know nothing about such things, but is it credible that "lack of completion of negotiation with IRS" is what has stopped them from having this feature till now? E-Trade and others like mysolo401k.net negotiated successfully years ago, but Vanguard could not?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by nepats »

Thanks! I was hoping for this and will help to further consolidate.
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neurosphere
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by neurosphere »

jameskay wrote: Fri Feb 12, 2021 9:34 am Thank you very much for sharing this info, neurosphere. I have had it on to do list to move my solo 401K out of vanguard to switch it to etrade since the latter allows rollovers. That in turn would allow me to rollover IRAs into the solo 401k to enable tax free backdoor roths, and also in general to consolidate too many separate retirement accounts DW and I have accumulated over the years. Your news gives enough hope that it is worth waiting a few more weeks to avoid hassle. Let's hope it comes to fruition.

I know nothing about such things, but is it credible that "lack of completion of negotiation with IRS" is what has stopped them from having this feature till now? E-Trade and others like mysolo401k.net negotiated successfully years ago, but Vanguard could not?
"Negotiation" is a poor word choice from someone that didn't understand how this works in the background. Here's a very simplified way to think about it. Fidelity, Vanguard, etc offer "off the shelf" solo 401ks. That is, they obtain pre-approval from the IRS to create a product with certain rules/features/etc and then offer than identical product to all. This can be a long and/or costly process to get this approval. Vanguard's plan, for whatever reason (likely simplicity at the time it was created) does not allow for incoming rollovers. In order to create a new solo 401k option that HAS this feature, they have to create an entirely new "application" of sorts to the IRS to get pre-approval for what's essentially a brand new plan. This can take a lot of work, and there has to be a good business reason to go through the effort.

Note that each feature is likely to increase the cost to Vanguard of offering a solo 401k. For example, processing income rollovers may cost more than the extra management fees the incoming rollover provides. Vanguard will have to pass this cost along to customers in some way. On the other hand, it's possible that on average processing the rollovers might be cost neutral or a cost savings. I have no idea. But each new feature/option/element in their new 401k plan will have a new cost, and that cost may or may not be offset by new business/assets.
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Vanguard Solo 401k now allows Rollovers

Post by MexiPino »

[merged into existing thread - moderator prudent]

Not sure if this was posted already, but just called Vanguard and they are allowing tIRA rollovers into Solo 401k accounts now. The change literally happened today and they said they would be sending out the new documents early next week.

My tIRA is with Vanguard and I was gonna open my Solo 401k at E-Trade because Vanguard didn't allow rollovers, but now that they do I'm just gonna stay with them.
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Re: Vanguard Solo 401k now allows Rollovers

Post by White Coat Investor »

About freaking time. Great news though.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by roth evangelist »

This is fantastic. Really makes Vanguard a no-brainer now as a choice for solo 401(k).
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by WorkToLive »

But still no mega back door Roth possibility at Vanguard Solo 401k, rights?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

This is marvelous news. I can finally move my former employer 401k! It's been sitting there because new 401k has higher admin fees and I'm on the cusp of needing backdoor Roth so didn't want a tIRA.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Kookaburra »

Do Vanguard solo 401ks also have a Roth? It would be great if they allow tIRA roll-ins and have a Roth!
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Tamarind
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

Kookaburra wrote: Fri Feb 19, 2021 10:20 pm Do Vanguard solo 401ks also have a Roth? It would be great if they allow tIRA roll-ins and have a Roth!
They do have a Roth option but I don't think they allow in-service conversions. The pre-tax money you roll in would stay pre-tax.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Kookaburra »

With this feature, Vanguard has just jumped ahead of Fidelity in terms of attractiveness of their solo401k. Hopefully this puts some pressure on Fidelity to finally get a Roth option in their solo 401k offering.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by jameskay »

I have an existing Vanguard Solo 401K, and I'd like to do rollovers into it from Vanguard-held Rollover IRAs and also from external 401Ks.
The vanguard personal website still doesnt let me exchange from Rollover IRA into Solo 401k, it says "Exchanging money between these accounts isn't permitted." Does anyone know if I first have to amend my plan? Or does this have to be done over phone? I did secure mail Vanguard the same question on 20-FEB, and havent gotten a response yet, so wanted to check if other BH already know the steps on how to do this...
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by HomeStretch »

You likely have to call so Vanguard can properly code the rollover into the 401k. At least that’s how it worked with Fidelity’s “non-employer retirement plan group” (it’s not an online process).
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Tamarind
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

I don't think they they support it quite yet, based on the info people mention getting from support. May be a few more weeks wait.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by langelgjm »

I recently closed my Solo 401k with Vanguard, as the amount in it wasn't worth the hassle of an additional account, and I was unlikely to add to it in the future.

For those who intend to roll over substantial balances, keep in mind the Form 5500 filing thresholds.

Also, does Vanguard still not offer Admiral shares in these accounts?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

langelgjm wrote: Fri Feb 26, 2021 7:40 am I recently closed my Solo 401k with Vanguard, as the amount in it wasn't worth the hassle of an additional account, and I was unlikely to add to it in the future.

For those who intend to roll over substantial balances, keep in mind the Form 5500 filing thresholds.

Also, does Vanguard still not offer Admiral shares in these accounts?
They do offer Admiral shares now.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

jameskay wrote: Thu Feb 25, 2021 10:40 am I have an existing Vanguard Solo 401K, and I'd like to do rollovers into it from Vanguard-held Rollover IRAs and also from external 401Ks.
The vanguard personal website still doesnt let me exchange from Rollover IRA into Solo 401k, it says "Exchanging money between these accounts isn't permitted." Does anyone know if I first have to amend my plan? Or does this have to be done over phone? I did secure mail Vanguard the same question on 20-FEB, and havent gotten a response yet, so wanted to check if other BH already know the steps on how to do this...
Did you ever hear back? I got a classic Vanguard response, basically "We don't allow any incoming rollovers. If that changes we'll announce it."
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by FinanceIsFun(ds) »

I'm very interested in this. Any update is appreciated.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by nungjames »

I spoke to them today about this.
The rep I spoke to said yes they were now accepting rollovers. I asked in the context of creating space for a backdoor roth.
The rep also said while the paperwork was now allowing it, the system itself might take a week or two to be ready.
The rep offered to get back in touch once the system was updated.
So we'll see what happens...
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by neurosphere »

nungjames wrote: Thu Mar 04, 2021 3:57 pm I spoke to them today about this.
The rep I spoke to said yes they were now accepting rollovers. I asked in the context of creating space for a backdoor roth.
The rep also said while the paperwork was now allowing it, the system itself might take a week or two to be ready.
The rep offered to get back in touch once the system was updated.
So we'll see what happens...
So it seems your impression was that EXISTING 401ks would be changed to now allow incoming rollovers? As opposed to something that would be applied to new solo 401ks?

Somehow it would seem that such a change might require the participants to sign a new agreement, as this is change to the plan? It's somewhat different than (for example) allowing admiral shares vs regular shares. But really, I'm just guessing. I don't really know how these things work. :D
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

neurosphere wrote: Thu Mar 04, 2021 5:07 pm
nungjames wrote: Thu Mar 04, 2021 3:57 pm I spoke to them today about this.
The rep I spoke to said yes they were now accepting rollovers. I asked in the context of creating space for a backdoor roth.
The rep also said while the paperwork was now allowing it, the system itself might take a week or two to be ready.
The rep offered to get back in touch once the system was updated.
So we'll see what happens...
So it seems your impression was that EXISTING 401ks would be changed to now allow incoming rollovers? As opposed to something that would be applied to new solo 401ks?

Somehow it would seem that such a change might require the participants to sign a new agreement, as this is change to the plan? It's somewhat different than (for example) allowing admiral shares vs regular shares. But really, I'm just guessing. I don't really know how these things work. :D
I'm pretty sure we'd have to amend the plans to allow this. But first Vanguard would need to have the new boilerplate plan ready.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by nungjames »

To clarify: I was asking about setting up a new individual 401k
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by cookiemonstera »

Called today and the retirement account rep said they are not allowing rollovers from IRAs to solo401k, and no idea when they would ever happen. No idea who to believe now...
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by paulsalem »

Unfortunately they don't allow loans if that's important to you.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by jameskay »

Tamarind wrote: Wed Mar 03, 2021 6:35 pm
jameskay wrote: Thu Feb 25, 2021 10:40 am I have an existing Vanguard Solo 401K, and I'd like to do rollovers into it from Vanguard-held Rollover IRAs and also from external 401Ks.
The vanguard personal website still doesnt let me exchange from Rollover IRA into Solo 401k, it says "Exchanging money between these accounts isn't permitted." Does anyone know if I first have to amend my plan? Or does this have to be done over phone? I did secure mail Vanguard the same question on 20-FEB, and havent gotten a response yet, so wanted to check if other BH already know the steps on how to do this...
Did you ever hear back? I got a classic Vanguard response, basically "We don't allow any incoming rollovers. If that changes we'll announce it."
I got a response to my 20-FEB secure mail on 01-MAR from a Small Business specialist at Vanguard telling me that they'll phone me on 08-MAR and work on my rollover with me. It remains to be seen whether they'll tell me I have to amend my plan or actually complete the rollover. I will post again after 08-MAR.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by jameskay »

Vanguard rep was a no show for the appointment they scheduled with me, but I later got a secured message telling me they will let me know when the process for the rollover is available. I think their service is struggling and/or they are working extra hard to keep our costs low :happy
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by SuperXmas »

I called this AM. One guy said they are accepting but I need to initiate with ML. That’s unusual so I called back and the second rep said to sit tight bc they won’t be ready to accept rollovers for another couple weeks. Seems like it’s coming but not quite ready.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by nepats »

I don't see any updates on this yet. The website hasn't changed and lacks any options to initiate a rollover online.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by mstrcvdstr »

Vanguard Individual 401K will accept a roll over from an existing 401K. My company closed their 401K last month. I rolled over my entire employment 401K into my Individual 401K. I had to call Vanguard and talk to a Small Business Specialist. I believe I was their first rollover of this kind. Went very smoothly. Everything was done electronically except the mailing of the check.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by nepats »

mstrcvdstr wrote: Tue Apr 06, 2021 6:56 pm Everything was done electronically except the mailing of the check.
Thanks for the info. Why not electronic direct funds transfer? Is that a limitation of Vanguard?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by mstrcvdstr »

Everything was done electronically except the mailing of the check.


Thanks for the info. Why not electronic direct funds transfer? Is that a limitation of Vanguard?


Limitation of old 401K
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by EnjoyIt »

Good to hear, but a little too late. I just moved my 401k to E*TRADE a few months back for this exact reason. It’s a shame because I would prefer to have stayed with Vanguard but I guess the E*TRADE signup bonus was pretty nice as well.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by aaron239 »

FYI, we are working on a rollover into one of our Vanguard solo 401ks now. The first step is updating the plan documents, as was suggested above, to allow for the rollover. After the new plan documents are completed, we are able to rollover the balance as normal. I'll post here once we have more progress.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by TIAX »

aaron239 wrote: Mon Apr 12, 2021 1:15 pm FYI, we are working on a rollover into one of our Vanguard solo 401ks now. The first step is updating the plan documents, as was suggested above, to allow for the rollover. After the new plan documents are completed, we are able to rollover the balance as normal. I'll post here once we have more progress.
Is this something you're doing electronically?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by paramenace »

I spoke with Vanguard rep today who confirmed for me that they are now allowing these rollovers. He helped me set up a solo 401k (i401k is what they call it) and fill out the correct paperwork to rollover my SEP and my traditional IRA. He was also quite knowledgeable about the backdoor Roth process
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Ineed$ »

I am retired but still have the company’s 401k. Solo 401k is new to me. Would it help, and if so why?
I have other accesses just curious about my 401k and Solo 401k.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Soon2BXProgrammer »

Ineed$ wrote: Wed Apr 14, 2021 9:55 pm I am retired but still have the company’s 401k. Solo 401k is new to me. Would it help, and if so why?
I have other accesses just curious about my 401k and Solo 401k.
Solo 401k is only helpful if you need a 401k to hide assets form the IRA prorata rules. Solo 401k is only available if you have your own business. (schedule c or 1099 or etc.) or its helpful if you have a business and its just you and you want to save for retirement.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Ineed$ »

Thank you.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by EnjoyIt »

Soon2BXProgrammer wrote: Wed Apr 14, 2021 9:58 pm
Ineed$ wrote: Wed Apr 14, 2021 9:55 pm I am retired but still have the company’s 401k. Solo 401k is new to me. Would it help, and if so why?
I have other accesses just curious about my 401k and Solo 401k.
Solo 401k is only helpful if you need a 401k to hide assets form the IRA prorata rules. Solo 401k is only available if you have your own business. (schedule c or 1099 or etc.) or its helpful if you have a business and its just you and you want to save for retirement.
I would add also a solo401k can be of benefit if your old 401k does not have good investing options or has high fees.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by jameskay »

DW and I have now also now completed first rollovers into a Solo 401K that we've had at Vanguard for years.

Specifically, we transferred DW's Rollover IRA and Traditional IRA (both held at Vanguard) into the pre-tax portion of her Vanguard Solo 401K. We had to fill out (and US mail) forms that were told to me by a Vanguard Small Business rep. Once they received the forms, the transfer of funds happened correctly and we can see the funds in the Solo 401K.

Unlike previous poster, Vanguard did NOT make me amend my Solo 401K documentation to specify that it now allows rollovers. I didnt ask if I needed to, and no one brought it up, so....'

I am happy that we have fewer retirement accounts for DW and that she can now do a backdoor roth without having to deal with the pro rata rule.

I also have initiated a transfer of a 401K held at other brokerage for former job into the same Solo 401K. In that case, like another poster, I had to get a check from the other broker sent over to Vanguard. So my money is out of the market for a week or so, but it is worth it to achieve the consolidation.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Tamarind »

I'm starting this process now to move over a former employer 401k. After calling the small business group, I specifically asked to amend my plan, and was sent a digital copy to sign. Will be reviewing today.

The rep I spoke to said that he's taking a lot of calls on the subject of rollovers lately. He said he assesses why callers want to perform an incoming rollover - in about half of cases they are knowledgeable about the plans, "for example they want to enable a backdoor Roth" and he speeds them on their way. In other cases people are asking about rollovers even though they do not appear to be eligible to open a solo 401k.

Anyone have any tips or stories about getting the correct letter of instruction from your former employer custodian?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by jameskay »

Tamarind wrote: Thu Apr 22, 2021 7:39 am
Anyone have any tips or stories about getting the correct letter of instruction from your former employer custodian?
For my case where I am also rolling over money from former employer custodian - to add more to what I said previously - I actually had the check mailed to me (payable to Vanguard FBO <me>) and then US mailing the check on to Vanguard along with a letter of instruction written by me to make my intentions 100% clear. Old custodian assures me that if check gets lost, i can call them to void it and start over. This part is still in progress. Vanguard rep suggested I do it this way also.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by aaron239 »

aaron239 wrote: Mon Apr 12, 2021 1:15 pm FYI, we are working on a rollover into one of our Vanguard solo 401ks now. The first step is updating the plan documents, as was suggested above, to allow for the rollover. After the new plan documents are completed, we are able to rollover the balance as normal. I'll post here once we have more progress.
We did successfully rollover a qualified 401k into a solo 401k at Vanguard. I had to sign new documents to "upgrade" the 401k to be compliant. Then, after receiving the check from my previous 401k, I forwarded it with a letter of intent to Vanguard, and the rollover was completed.

It was initiated digitally, but I also chose to speak with them on the phone to ensure all was smooth. The process all said-and-done was about 2 weeks, from the time I requested the check from my old 401k, to when it was deposited and invested at Vanguard.

Incidentally, I had Roth 401k funds in the old 401k, and Vanguard easily allowed that to be rolled into my Roth IRA at Vanguard.

~aaron239
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Rxwolf »

I have a question.

If someone want to, they could roll over their trad. 401k/403b from old job to vanguard solo 401k and then when they turn 55, could they then begin to pull any or all out from vanguard 401k without 10% early withdrawal penalty if they quit their job which is tied to vanguard solo 401k account?

This would be with any solo 401K set up, not just vanguard.

Am I missing something?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Eagle33 »

Rxwolf wrote: Sun May 16, 2021 12:53 am I have a question.

If someone want to, they could roll over their trad. 401k/403b from old job to vanguard solo 401k and then when they turn 55, could they then begin to pull any or all out from vanguard 401k without 10% early withdrawal penalty if they quit their job which is tied to vanguard solo 401k account?

This would be with any solo 401K set up, not just vanguard.

Am I missing something?
What do you mean by "quit their job"? Their old W2 job or stop self employment?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by southerndoc »

I received the info last week and adopted the new agreement. It was a simple process to fill the paperwork out online and e-sign with Docusign, but I couldn't do it with Chrome. There was a "too many redirect" error message that no matter what I did, I couldn't figure a way to resolve. So I used my Windows 10 work laptop and Microsoft Edge to do it. Windows Chrome and macOS chrome (on 2 different computers) would not work.

It's weird because I thought it would require my small business login, but it required my personal account (account administrator) login to finish.
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by Careful »

Has anyone moved a Fidelity Solo 401K to Vanguard Solo 401K yet? Chose Fidelity over Vanguard b/c of the ability to move other $$ into Fidelity, though we haven't actually pulled the trigger on it. Fidelity has been exceptionally low in fees - is Vanguard the same for the solo 401K?
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Re: Vanguard solo 401k to allow incoming rollovers?!

Post by neurosphere »

Careful wrote: Tue Jun 08, 2021 8:53 pm Has anyone moved a Fidelity Solo 401K to Vanguard Solo 401K yet? Chose Fidelity over Vanguard b/c of the ability to move other $$ into Fidelity, though we haven't actually pulled the trigger on it. Fidelity has been exceptionally low in fees - is Vanguard the same for the solo 401K?
I have the same question. Due to a giant reduction in household income anticipated for 2020, it now makes sense for me to make Roth 401k contributions, which Fidelity does not allow. So I'm considering moving the plan to Vanguard. I'm hoping someone else has recently done this and can share their experience. I'm assuming (but have yet to confirm) that Vanguard allows Roth contributions and also will do Roth conversions within the plan.

Edited to add: I clicked on a "get started" type link for opening a solo 401k at Vanguard in order to browse the form and get an idea of the process. But it takes me to a link to a "Brokerage Account Application for Trusts" e-form. Hmm, so I thought perhaps a 401k is a type of trust in this case, but then clicking ahead it asks to upload a copy of the trust and enter grantor information. :oops: I get to this same Trust form from two different solo 401k pages. :oops: Such as this one, https://investor.vanguard.com/small-bus ... -solo-401k, "For existing clients, click here to start your digital experience". Not a good "digital experience"!
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
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