Solo 401K with E-trade or Vanguard?

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sighchological
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Solo 401K with E-trade or Vanguard?

Post by sighchological » Thu Apr 12, 2018 10:17 pm

I didn’t do my 2017 taxes yet, and I’m about to open up a SEP-IRA for 2017 and transfer it into a Solo 401k for 2018 (if using e-trade). I'm trying to make a decision whether to stick with Vanguard for simplicity's sake, or use Etrade.

My self employment income is around $10-$15K a year.
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Some questions:

If opening up a solo 401k with Vanguard:

Thinking of using Vanguard LifeStrategy Growth Fund (VASGX) since there is no option for admiral funds, and my desired asset allocation is 80/20.

1) Seems like the trade cost is $7 per trade. I thought there are no fees when purchasing mutual funds?

2) I may contribute to the solo 401K at different times during the year. Does the $7 per trade mean every time I purchase VASGX I have to pay $7?

3) Seems like there is no option for rollover. Besides the backdoor roth, what other scenarios will I need to rollover?

a. I don’t fully understand the Backdoor Roth, however, our AGI in 2016 was $123.5K and I don’t think we will need to do a backdoor roth in the future unless somehow our income jumps dramatically.... am i correct in this train of thought?
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If using E-Trade,

I read the boglehead wiki on e-trade, https://www.bogleheads.org/wiki/E*TRADE, but I still have some questions.

There is a list of commissions free ETF’s, one being iShares Core S&P Total U.S. Stock Market ETF (ITOT). https://us.etrade.com/e/t/estation/help?id=1204000003 that I am interested in.

1) I may contribute to the solo 401K at different times during the year. If I only purchase ITOT for the solo 401k, since it is a commission free ETF does that mean there will be no fees for each purchase?

2) Would using ITOT as a substitute for VTSAX (Vanguard Total Stock Market Index Fund) be okay?

PFInterest
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Re: Solo 401K with E-trade or Vanguard?

Post by PFInterest » Thu Apr 12, 2018 10:28 pm

Vanguard won't accept incoming transfers.

drk
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Re: Solo 401K with E-trade or Vanguard?

Post by drk » Thu Apr 12, 2018 10:55 pm

sighchological wrote:
Thu Apr 12, 2018 10:17 pm
1) I may contribute to the solo 401K at different times during the year. If I only purchase ITOT for the solo 401k, since it is a commission free ETF does that mean there will be no fees for each purchase?
Correct.
sighchological wrote:
Thu Apr 12, 2018 10:17 pm
2) Would using ITOT as a substitute for VTSAX (Vanguard Total Stock Market Index Fund) be okay?
Yes, absolutely.

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White Coat Investor
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Re: Solo 401K with E-trade or Vanguard?

Post by White Coat Investor » Fri Apr 13, 2018 12:07 am

This is a no-brainer for what you want to do- eTrade. I have a Vanguard solo 401(k). It is restricted to investor share classes and doesn't take IRA rollovers. If I had it to do over again, I'd open it at eTrade. For now, inertia has me by the nose so I'm still at Vanguard. I'm considering closing that plan, rolling mine into my old TSP, and rolling my wife's over to the new plan someplace like eTrade. It's starting to be enough money that the difference between investor shares and admiral shares is becoming significant. 10 basis points on $100K is only $100 a year. On $1M, it's $1000 a year. Over 20 years, that's $20K, which is enough to shock me out of my state of inertia and actually do something about it. I've been hoping Vanguard will fix their product, but I'm starting to lose hope.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

TwstdSista
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Re: Solo 401K with E-trade or Vanguard?

Post by TwstdSista » Fri Apr 13, 2018 4:33 am

Are you certain VG will charge you $7 to trade their own fund? That's a bit unusual. (Although my experience is at Fidelity -- they have never charged my for buying a Fidelity fund)

Regardless, E-Trade is the clear winner here.

anil686
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Re: Solo 401K with E-trade or Vanguard?

Post by anil686 » Fri Apr 13, 2018 7:01 am

My spouse had a Solo 401K with VG - there was no charge for buying a LS fund (she did moderate growth) - FYI. also be careful of comparing expenses between balanced funds whose mandate is to rebalance daily (or close to daily) with a portfolio that you have to balance. Neither is better or worse than the other but the costs are not comparable - You performance will vary between the two by much more than the cost obviously due to the frequent rebalancing - sometimes that is better, sometimes not. But the difference of 0.06 blended ER is much less than this article by Rick Ferri some years ago talking about when people rebalance. The advantage of the LS funds is that they do what is difficult emotionally to do - sell what is going up and buy what is going down - within both equities, bonds, international, domestic. The disadvantage (maybe) is the addition of the international bonds (small % of LS growth) and that the allocation could change over time which should not be a problem in a tax deferred account where you can transact without tax consequences. Hope that helps...

https://www.forbes.com/sites/rickferri/ ... 10ed0c1f53

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sighchological
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Re: Solo 401K with E-trade or Vanguard?

Post by sighchological » Fri Apr 13, 2018 4:06 pm

Thanks everyone for the help.

I opened up a SEP-IRA with E-Trade today for 2017 and moved $1,695 into my sweep account.

I asked 2 customer service reps if ITOT was eligible for automatic dividend reinvestments, and both said no, most ETF's do not qualify. So I don’t think I will use ITOT.

1) How about using SCHWAB TOTAL STOCK MARKET INDEX (SWTSX) https://www.etrade.wallst.com/v1/stocks ... mbol=SWTSX in replacement of VTSAX? This fund is a “No Load No Transaction” fund.

socal777
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Re: Solo 401K with E-trade or Vanguard?

Post by socal777 » Fri Apr 13, 2018 10:26 pm

Thanks for letting us know about automatic dividend reinvestments not being allowed with ITOT. I was about to open my Individual 401k and buy ITOT. Now I like your idea about buying Schwab SWTSX instead. It's 0.03% ER is even lower than Vanguard's VTSAX at 0.04%.

Are we missing anything here?

TwstdSista
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Re: Solo 401K with E-trade or Vanguard?

Post by TwstdSista » Sat Apr 14, 2018 4:53 am

Schwab Total Stock Market Index Fund (SWTSX) ER 0.03% is a fantastic choice!

The only problem with the Schwab funds is their international fund (Schwab International Market Index Fund (SWISX) ER 0.06%) which is not a "total" international fund. However it does cover the majority of international stocks. And there are ways to build a total international portfolio at Schwab. (I don't actually know how to do this, but there have been a few threads here discussing it).

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sighchological
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Re: Solo 401K with E-trade or Vanguard?

Post by sighchological » Sat Apr 14, 2018 12:21 pm

Cool. Seems like SWTSX is the best for me, unless anyone else has any other ideas.

TwstdSista, thanks for pointing out the international issue. I have Vanguard Total International (Admiral) in my wife's 403B, so i will be using that for the international portion of my 3 fund portfolio.

Loyalnine
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Re: Solo 401K with E-trade or Vanguard?

Post by Loyalnine » Sat Apr 14, 2018 6:37 pm

White Coat Investor wrote:
Fri Apr 13, 2018 12:07 am
This is a no-brainer for what you want to do- eTrade. I have a Vanguard solo 401(k). It is restricted to investor share classes and doesn't take IRA rollovers. If I had it to do over again, I'd open it at eTrade. For now, inertia has me by the nose so I'm still at Vanguard. I'm considering closing that plan, rolling mine into my old TSP, and rolling my wife's over to the new plan someplace like eTrade. It's starting to be enough money that the difference between investor shares and admiral shares is becoming significant. 10 basis points on $100K is only $100 a year. On $1M, it's $1000 a year. Over 20 years, that's $20K, which is enough to shock me out of my state of inertia and actually do something about it. I've been hoping Vanguard will fix their product, but I'm starting to lose hope.
So why not Schwab or Fidelity? I’ve read your article on this, and I get that they don’t allow Roth or loans like E-Trade. But if you’re not interested in either of those options, wouldn’t the lower-expense ratio, commission free fund options best out E-Trade?

Thanks for everything you do by the way! I have been binge-listening (?) your podcasts.

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Re: Solo 401K with E-trade or Vanguard?

Post by White Coat Investor » Sun Apr 15, 2018 12:09 am

Loyalnine wrote:
Sat Apr 14, 2018 6:37 pm
White Coat Investor wrote:
Fri Apr 13, 2018 12:07 am
This is a no-brainer for what you want to do- eTrade. I have a Vanguard solo 401(k). It is restricted to investor share classes and doesn't take IRA rollovers. If I had it to do over again, I'd open it at eTrade. For now, inertia has me by the nose so I'm still at Vanguard. I'm considering closing that plan, rolling mine into my old TSP, and rolling my wife's over to the new plan someplace like eTrade. It's starting to be enough money that the difference between investor shares and admiral shares is becoming significant. 10 basis points on $100K is only $100 a year. On $1M, it's $1000 a year. Over 20 years, that's $20K, which is enough to shock me out of my state of inertia and actually do something about it. I've been hoping Vanguard will fix their product, but I'm starting to lose hope.
So why not Schwab or Fidelity? I’ve read your article on this, and I get that they don’t allow Roth or loans like E-Trade. But if you’re not interested in either of those options, wouldn’t the lower-expense ratio, commission free fund options best out E-Trade?

Thanks for everything you do by the way! I have been binge-listening (?) your podcasts.
They're all fine as long as they offer the features you need. If you prefer Fidelity/Schwab index funds to Vanguard ETFs, then go for it. The differences are miniscule.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Earl Lemongrab
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Re: Solo 401K with E-trade or Vanguard?

Post by Earl Lemongrab » Sun Apr 15, 2018 5:08 pm

sighchological wrote:
Fri Apr 13, 2018 4:06 pm
I asked 2 customer service reps if ITOT was eligible for automatic dividend reinvestments, and both said no, most ETF's do not qualify. So I don’t think I will use ITOT.
I find that surprising. I have a query in to Etrade about eligible ETFs. It's possible that the rules might be different for i401(k)s of course.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Earl Lemongrab
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Re: Solo 401K with E-trade or Vanguard?

Post by Earl Lemongrab » Mon Apr 16, 2018 3:25 pm

Here's what Etrade customer service responded with:
We currently do not have a list of ETFs that are eligible for DRIP. But, I did submit a research request and can confirm that ITOT is eligible for DRIP. You can enroll ITOT in the Dividend Reinvestment Program (DRIP) by [blah blah snipped].

If you are unable to enroll ITOT at this page, you can simply respond to this secure message and request that we enroll it for you and we will get that done.
This is for a regular brokerage account, not an i401(k), so I couldn't say whether the rules are different there.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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