Solo 401k options

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firegirl
Posts: 6
Joined: Tue Jan 16, 2018 4:14 am

Solo 401k options

Post by firegirl » Tue Jan 16, 2018 5:37 pm

Getting ready to open a solo 401k for this year. Fidelity is free and easy to open from what I read and seems to be my best, low-cost startup plan.

In a year or two....if my income increases, can I switch to using DiscountSolo401k.com where I can set up the plan with all the options available (after-tax, loan options, different investment options)?

I don't think I will have enough income this year to be able to maximize funding an after tax account along with the Employee side. The fee is like 500 to set up + 100 per year I believe. I'd like to eventuakky set up the plan via discountsolo401k thru Fidelity as well.

Do you think this will be a problem down the road since I would be starting out with the bare bones Fidelity solo401k or should I just go ahead and go the discountsolo401k from the get go with all the options. I'm really interested in the mega backdoor roth part so that is why I'm going back and forth.

bloom2708
Posts: 4129
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Solo 401k options

Post by bloom2708 » Wed Jan 17, 2018 1:38 pm

Keep the fees low and investment options optimal.

Have you looked into Vanguard's Individual 401k?

https://investor.vanguard.com/what-we-o ... idual-401k

Fidelity should be fine if you stick with their index based, low expense, diversified funds.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

Spirit Rider
Posts: 7987
Joined: Fri Mar 02, 2007 2:39 pm

Re: Solo 401k options

Post by Spirit Rider » Wed Jan 17, 2018 5:10 pm

It is relatively easy to amend a one-participant 401k plan to a new provider and then transfer the assets. Like most things with these plans it is a little more involved than an IRA trustee -> trustee transfer. However, it is not that difficult and I'm sure your providers will walk you through it.

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BolderBoy
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Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Solo 401k options

Post by BolderBoy » Wed Jan 17, 2018 5:16 pm

firegirl wrote:
Tue Jan 16, 2018 5:37 pm
The fee is like 500 to set up + 100 per year I believe.
Unless you have very special needs, you shouldn't have to pay any fees or ongoing maintenance costs to have a solo401k. You mentioned "loans". It is highly dis-recommended to take loans from your 401k plan.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

rudeboy
Posts: 90
Joined: Thu Oct 05, 2017 9:21 pm

Re: Solo 401k options

Post by rudeboy » Wed Jan 17, 2018 5:23 pm

I was looking into the same thing a couple weeks ago (here's my thread: viewtopic.php?f=1&t=237443&p=3711500#p3711500)

FWIW I did end up going with Vanguard and am feeling good about that decision.

I too looked into Fidelity and was put off by the fact that you have to contribute by mailing in a check. You can read the reviews here: https://www.fidelity.com/retirement-ira ... k/overview

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The529guy
Posts: 610
Joined: Fri May 23, 2014 1:08 am

Re: Solo 401k options

Post by The529guy » Wed Jan 17, 2018 5:56 pm

BolderBoy wrote:
Wed Jan 17, 2018 5:16 pm
firegirl wrote:
Tue Jan 16, 2018 5:37 pm
The fee is like 500 to set up + 100 per year I believe.
Unless you have very special needs, you shouldn't have to pay any fees or ongoing maintenance costs to have a solo401k. You mentioned "loans". It is highly dis-recommended to take loans from your 401k plan.
It looks like the OP is interested in a solo 401k that supports after-tax contributions, which the big providers won't do. In that light, fees / costs for maintenance make sense.

Read what TFB has to say about it here: https://thefinancebuff.com/after-tax-co ... -401k.html

mervinj7
Posts: 440
Joined: Thu Mar 27, 2014 3:10 pm

Re: Solo 401k options

Post by mervinj7 » Thu Jan 18, 2018 2:50 pm

bloom2708 wrote:
Wed Jan 17, 2018 1:38 pm
Keep the fees low and investment options optimal.

Have you looked into Vanguard's Individual 401k?

https://investor.vanguard.com/what-we-o ... idual-401k

Fidelity should be fine if you stick with their index based, low expense, diversified funds.
I thought the Vanguard one had $20 fee if you are not a Flagship member. The other issue is they don't accept incoming IRA rollovers (useful for those interested in Backdoor IRAs).

Spirit Rider
Posts: 7987
Joined: Fri Mar 02, 2007 2:39 pm

Re: Solo 401k options

Post by Spirit Rider » Thu Jan 18, 2018 3:47 pm

Vanguard has two additional disadvantages:
  1. You can not purchase Admiral Share class funds in Vanguard's Individual 401k. This adds about 0.10% to the index fund expense ratios.
  2. Vanguard's Individual 401k does not allow employee eligibility restrictions. The IRS and the other one-participant 401k plan providers allow you to restrict eligibility to those employees >= 21 and >= one year of service >= 1,000 hours/year.
To my mind the second disadvantage is the biggest one:
  • It prevents you from hiring HS/College students and/or part-time employees < 20 hours/week.
  • It doesn't give you a one year period after hiring full-time help to get a different employer retirement plan.
  • It even prevents you from hiring your kids when they get older to provide compensation for Roth IRA contributions.

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