Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

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tfb
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Mon Nov 04, 2019 12:58 pm

retiredjg wrote:
Mon Nov 04, 2019 11:25 am
I may be wrong, but I don't think so. A TPA is a 3rd party administrator - someone who is not either the plan provider or the employer (meaning the self-employer). In other words, I don't think TPAs provide plans at all.
TPAs typically resell a prototype plan from a wholesale sponsor. If you go with a TPA, you are required to go on the plan document that TPA resells, because they are confident in being held responsible to comply with the provisions of that plan document, not any other random document. The online providers in the OP also resell a prototype plan. They just chose not to serve as a TPA.
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crystalbank
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by crystalbank » Mon Nov 04, 2019 1:27 pm

Gemini wrote:
Thu Oct 31, 2019 9:57 am
After reading this thread, I reached out to a TPA.

It is $500 to setup this type of Plan and then $500 per year to administer the plan (assuming there is less than $250,000 - $600 if greater). Added fees for distributions and 1099’s in any year that there are distributions.

When asked about sub accounts and contribution calculation help, TPA noted "we will have as many subaccounts as are needed. Some investment companies can handle this and will divide out the account into the subaccounts, others don’t and then we prepare a statement each year showing the subaccounts. Our Plan Document acts as your trust, so yes there is a trust created. I’m not exactly sure what you mean by assisting to verify our calculations, but we will provide you with a maximum contribution each year based upon your income and Plan limits and if needed, prepare the subaccount statement in addition to financial statements on the plan assets." Also "we are not going to be your financial advisor and do not actually set up the account with Fidelity. We get copies and have online access to your Fidelity account for reporting purposes only. The price includes everything except distribution fees and 1099’s. "


It appears there might not be as much handholding going this route. Or am I reading too much into it? I don't want to mess this up!
If you don't mind me asking - Can you share the details of the TPA? PM me if you don't want to post it here. I think those services seem like the right fit for my case. Thanks.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by richardglm » Mon Nov 04, 2019 4:28 pm

simas wrote:
Mon Nov 04, 2019 8:41 am
richardglm wrote:
Sun Nov 03, 2019 7:50 pm
Is there an advantage to setting a solo 401k like these up in january/february vs november/december? Early in the year would let the contributions grow tax-free (assuming immediate rollovers from after tax to roth after each contribution)
please note that I do January/February contributions for things like after-tax non-Roth for the previous tax year (not for the current one). i do not have enough visibility and confidence into stability of my consulting income (clients change, their needs change, their budgets change, projects end, etc) to know what my business income would be in the current year as early as Q1 of that year.
Understandable, since a business has potential for a loss, even revenue which is earned early in the year may not be available as net business income by the end of the year.

I think it may still be reasonable to make some contributions as revenue is realized? (and then finish contributions once business income is determined) I just wonder what the paperwork requirements would be for monthly contributions->immediate rollover. As far as I can tell, only one 1099-R is required at the end of the year?

To answer my own prior question it does not appear possible to rollover an existing roth IRA to a roth 401k.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by retiredjg » Mon Nov 04, 2019 5:07 pm

tfb wrote:
Mon Nov 04, 2019 12:58 pm
retiredjg wrote:
Mon Nov 04, 2019 11:25 am
I may be wrong, but I don't think so. A TPA is a 3rd party administrator - someone who is not either the plan provider or the employer (meaning the self-employer). In other words, I don't think TPAs provide plans at all.
TPAs typically resell a prototype plan from a wholesale sponsor. If you go with a TPA, you are required to go on the plan document that TPA resells, because they are confident in being held responsible to comply with the provisions of that plan document, not any other random document. The online providers in the OP also resell a prototype plan. They just chose not to serve as a TPA.
Thanks Harry.

I'm confused about 1 thing...I thought those providers sell a custom plan (which facilitates the mega back door) rather than reselling a prototype plan (which does not support the mega back door). What am I missing? Can you get me straight on that please?

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Mon Nov 04, 2019 5:57 pm

retiredjg wrote:
Mon Nov 04, 2019 5:07 pm
I'm confused about 1 thing...I thought those providers sell a custom plan (which facilitates the mega back door) rather than reselling a prototype plan (which does not support the mega back door). What am I missing? Can you get me straight on that please?
A "custom plan" we are talking about here is really a shorthand for a "more customizable prototype plan." Only the very large employers with thousands of employees get a true custom plan written for just that one employer. Vanguard, Fidelity, etc. lock down their prototype plans by exposing only the very basic features in the adopting agreement they give to the adopting employers. They are primarily motivated by getting the investments. If a basic plan gets them 99% of the businesses, going more complex for the last 1% just isn't worth it to them. TPAs open up more features in their prototype plan because they are comfortable they can handle those features. Handling those features is their job. The non-TPA resellers open up more features in their prototype plan because the features not present in a basic plan from Vanguard, Fidelity etc. are still sought after by some employers. 1% of all self-employed businesses in the country is still a large number to them, but they don't want to serve as a TPA. So they leave that job and the risks to the clients.
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Caduceus » Mon Nov 04, 2019 6:02 pm

Spirit Rider wrote:
Sun Oct 20, 2019 1:40 pm
retiredjg wrote:
Sun Oct 20, 2019 11:13 am
I agree with you. It would be helpful to know more of the details. I have some vague ideas, but it's a bit muddy to me as well.
Off of the top of my head, here are just some the things a TPA could prevent:
  • Trustee errors regarding contributions, withdrawals or rollovers.
  • Reporting errors regarding contributions, withdrawals or rollovers.
  • Record keeping errors. Basic errors and failing to separately account for not just type but distributable nature.
  • Amendment errors. Initial amendment (timing, effective date and provisions). Additional complex rules.
  • Mistakenly having two 401k plans for the same business which is prohibited.
  • Making excess employer contributions that can not be returned.
  • Making excess annual additions by failing to take into account that there is also a 100% of compensation limit in 415c and that employer contributions reduce compensation and also reduce the resulting reduced annual addition limit.
  • Prohibited transactions.
  • General 401k plan compliance issues. Most often operational errors. The failure to explicitly follow ALL of the terms of the 401k plan document.
  • I wonder just how many people who use MySolo401k.com, DiscountSolo401k.com, Solo401k.com or other 401k plan document only sources. Actually read and understand the entire 401k plan document and understand they are the one responsible for following them to the letter.
I'm very interested in this list and I appreciate what Spirit Rider has said. As someone with a Solo 401k Plan, I look through the list and I have some follow up questions for you. It seems that a reasonably dilligent investor could avoid a lot of the above - things like having 2 401k plans, or making excess contributions. But I have two more specific questions: (1) Can you think of some of the errors a person having a prototype/default plan with one of the big providers (Vanguard, Fidelity, ETrade, etc.) might make that they might not realize they are making, if you exclude things that a reasonable financially savvy person should know, like not making excess contributions, or keeping track of rollovers, etc. (2) Are there particular errors that are egregious? It seems that a lot of these errors could be rectified if the IRS were ever to audit the 401k. Even a disorganized individual could at that point pull out statements to come out with a reporting spreadsheet, etc.

I guess I'm asking this because that is precisely my blind spot, and I am curious if there are things I don't know that I should know. I have read through my plan document, some parts much more carefully than others, but so far, it really has seemed very simple to administer my plan and keep track of contributions.

Thanks!

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Gemini » Mon Nov 04, 2019 8:01 pm

tfb wrote:
Mon Nov 04, 2019 12:44 pm
Gemini wrote:
Thu Oct 31, 2019 9:57 am
After reading this thread, I reached out to a TPA.

It is $500 to setup this type of Plan and then $500 per year to administer the plan (assuming there is less than $250,000 - $600 if greater). Added fees for distributions and 1099’s in any year that there are distributions.

When asked about sub accounts and contribution calculation help, TPA noted "we will have as many subaccounts as are needed. Some investment companies can handle this and will divide out the account into the subaccounts, others don’t and then we prepare a statement each year showing the subaccounts. Our Plan Document acts as your trust, so yes there is a trust created. I’m not exactly sure what you mean by assisting to verify our calculations, but we will provide you with a maximum contribution each year based upon your income and Plan limits and if needed, prepare the subaccount statement in addition to financial statements on the plan assets." Also "we are not going to be your financial advisor and do not actually set up the account with Fidelity. We get copies and have online access to your Fidelity account for reporting purposes only. The price includes everything except distribution fees and 1099’s. "


It appears there might not be as much handholding going this route. Or am I reading too much into it? I don't want to mess this up!
I see a lot of handholding. The TPA includes subaccount tracking when the broker (such as Vanguard) only allows a pooled account, sparing you the trouble of opening multiple accounts and possibly contributing to a wrong account. The TPA will give you the maximum contribution, presumably broken down by contribution types. My calculator was wrong at one point for some income scenarios. It still can be wrong for some other scenarios. The TPA doesn't serve as your financial advisor. That's expected. They don't open the account for you with Fidelity, because they are only the administrator, not the trustee. That's also expected.
Good to know. In your opinion, assuming I wan to use Fidelity, is this the route I should undertake? Any particular questions to ask this TPA prior to taking the plunge?


On another note: how challenging is it to open accounts with Fido especially a trust? Can I do this myself or do I need guidance etc?

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by tfb » Mon Nov 04, 2019 8:59 pm

Gemini wrote:
Mon Nov 04, 2019 8:01 pm
In your opinion, assuming I wan to use Fidelity, is this the route I should undertake? Any particular questions to ask this TPA prior to taking the plunge?

On another note: how challenging is it to open accounts with Fido especially a trust? Can I do this myself or do I need guidance etc?
I would, either this TPA or Employee Fiduciary, which another poster mentioned in this thread having similar pricing. You can ask whether the firm is a member of ASPPA, and how many employees have ASPPA credentials (QKA, QPA, CPC). Assuming this TPA also administers other non-solo 401k plans, I don't expect any competency problems, because a solo 401k is simpler than those other plans the TPA already handles. If they set you up in their plan administration software, the software will do the job for all plans. Any issues would be on timely responses after the year end when all the clients want their plan accounting and calculation done at the same time.

You can take a look at Fidelity's account application:

https://www.fidelity.com/bin-public/060 ... cation.pdf

You're just filling in some information. The TPA can answer your questions if you are not familiar with any terminology. Or you can call Fidelity's department that handles investment-only retirement accounts.

https://www.fidelity.com/retirement-ira ... only-plans
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by White Coat Investor » Tue Nov 05, 2019 12:11 am

retiredjg wrote:
Tue Oct 22, 2019 6:28 pm
White Coat Investor wrote:
Tue Oct 22, 2019 5:14 pm
retiredjg wrote:
Tue Oct 22, 2019 4:44 pm
I am one of the "warn-ers". My warning is only for the mega back door Solo 401k (so far).

This is because I think most ordinary solo 401k users are using mainstream plan providers that also do plan administration. This could be complete ignorance on my part, but that is how I currently understand it. If I'm wrong, I hope someone will educate me.

I have no issue with the plans provided by the custom plan providers mentioned early in the thread. My issue is that people don't realize that those plan providers do not also provide plan administration and that they are responsible for that themselves. Many are not prepared to do this.
What plan administration task(s) are you particularly worried folks will screw up?
Jim, I'm not worried about you messing it up. I would assume you are one of the exceptions who probably will not mess it up because you know a lot more than the average person who is attempting this newish "thing".

I'm concerned about average investors who are jumping on the bandwagon with no idea about how to do it (see Spirit Rider's list for a start).


My opinion is that most people should just pay for an administrator. If not forever, do it for enough years to know what they are doing.
You guys are probably right. I'm amazed at how many people screw up a simple Backdoor Roth IRA and the Mega BD Roth IRA process is quite a bit more complicated.
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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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by retiredjg » Tue Nov 05, 2019 7:47 am

tfb wrote:
Mon Nov 04, 2019 5:57 pm
retiredjg wrote:
Mon Nov 04, 2019 5:07 pm
I'm confused about 1 thing...I thought those providers sell a custom plan (which facilitates the mega back door) rather than reselling a prototype plan (which does not support the mega back door). What am I missing? Can you get me straight on that please?
A "custom plan" we are talking about here is really a shorthand for a "more customizable prototype plan." Only the very large employers with thousands of employees get a true custom plan written for just that one employer. Vanguard, Fidelity, etc. lock down their prototype plans by exposing only the very basic features in the adopting agreement they give to the adopting employers. They are primarily motivated by getting the investments. If a basic plan gets them 99% of the businesses, going more complex for the last 1% just isn't worth it to them. TPAs open up more features in their prototype plan because they are comfortable they can handle those features. Handling those features is their job. The non-TPA resellers open up more features in their prototype plan because the features not present in a basic plan from Vanguard, Fidelity etc. are still sought after by some employers. 1% of all self-employed businesses in the country is still a large number to them, but they don't want to serve as a TPA. So they leave that job and the risks to the clients.
Thanks. It appears my understanding of "prototype plan" and "custom plan" was a little off. I have a better understanding now. :D

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by robphoto » Tue Nov 05, 2019 8:20 am

I have used the Vanguard Solo 401K. I have both a Roth and Traditional. They will walk you through things over the phone, and have specialists in the small business section who are very knowledgable. As someone mentioned early on, you can go to the max using the employer side contributions, depending on your total income. And you're not paying the annual fees of the other providers.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by cookymonster » Mon Nov 18, 2019 10:24 am

This whole process with Fidelity has been extremely cumbersome and painful.

My custom plan has been arranged through discount Solo 401k.

I set up three non-prototype accounts there and made my initial after-tax contribution. This was a pretty bad experience as they were picky about the signatures being dated. I have tried to make a transfer online to my Roth account, but online transfers are not allowed. I had read online somewhere that Fidelity could set up AUTOMATIC transfers from the after-tax account to the Roth account as soon as the deposit was made, but they denied that as well, telling me because they weren't the plan sponsor they didn't want to allow that. So I called and asked them to make the transfer over the phone. Sounds reasonable, right? Of course not. I have to fill another form out, sign and date it, and then fax or mail it in every time I want to do a transfer. I don't even have my own printer, let alone a fax machine.

Oh, Fidelity also doesn't allow me to invest in their zero funds in their non-prototype accounts.

I was hoping I could do the rollovers every time I got paid, but now I'm thinking I may just have to suck it up and pay the capital gains taxes. Maybe I'll at least roll the funds over right before each dividend payout.

Has anyone gotten Fidelity to be more accommodating? Or had better luck with another custodian?

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by HomeStretch » Mon Nov 18, 2019 10:54 am

Do you have a local Fidelity office where you can drop off forms/checks in person? I do that with my prototype Solo 401k and it works out well.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by rama13 » Mon Nov 18, 2019 1:08 pm

I just drop the form at my local office, and the transfer is done same-day. Not too difficult for something I only do once per year.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by cookymonster » Mon Nov 18, 2019 1:21 pm

I do have a local office. It is just downtown, not an easy place to park, and I don't feel like making trips there. I was also hoping to make the transfers frequently so as to minimize taxes. I guess my expectations were too high and I didn't realize Fidelity was so reliant on paper forms in 2019.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Mon Nov 18, 2019 1:42 pm

I’m curious if anyone has experience with other brokerage houses other than fidelity.

simas
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Mon Nov 18, 2019 4:26 pm

cookymonster wrote:
Mon Nov 18, 2019 10:24 am
I was hoping I could do the rollovers every time I got paid, but now I'm thinking I may just have to suck it up and pay the capital gains taxes. Maybe I'll at least roll the funds over right before each dividend payout.

Has anyone gotten Fidelity to be more accommodating? Or had better luck with another custodian?
did you mean income taxes (not capital gain taxes) above? after tax contributions can not generate capital gain taxes, they may result in recognized income for difference between amount rolled out and amount contributed.

I use Fidelity , same setup as yours - I am pretty happy with them but I deal with them 2 times a year at most
First time
- one day (typically end of January), when I know my net business profit I calculate how much I want to put into
-- my employee contribution account pre-tax (typically not used since I fill that at primary employment)
-- my employee contribution account Roth (typically not used)
-- my employer profit sharing contributions (always pre-tax)
-- my after-tax contributions
So , I have 2 checks I drop off to Fidelity to be put into the accounts above. Another 2 checks (typically) for my wife.
The drop off for forms and checks takes me 5 minutes total and may be few minutes of waiting once I come in.

- second time I see Fidelity is when my employer after-tax contributions cleared, when I drop off form for rollover. Again , up to a minute of wait, 15 seconds talking to agent. No checks involved. this is how after-tax contributions go to Roth (accounts at Fidelity). Zero issues for far.

this is it. nothing more. 4th year now.

I do not contribute during the year because I simply do not know what my net business income is going to be until year ends..

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by cookymonster » Mon Nov 18, 2019 7:37 pm

simas wrote:
Mon Nov 18, 2019 4:26 pm
cookymonster wrote:
Mon Nov 18, 2019 10:24 am
I was hoping I could do the rollovers every time I got paid, but now I'm thinking I may just have to suck it up and pay the capital gains taxes. Maybe I'll at least roll the funds over right before each dividend payout.

Has anyone gotten Fidelity to be more accommodating? Or had better luck with another custodian?
did you mean income taxes (not capital gain taxes) above? after tax contributions can not generate capital gain taxes, they may result in recognized income for difference between amount rolled out and amount contributed.

I use Fidelity , same setup as yours - I am pretty happy with them but I deal with them 2 times a year at most
First time
- one day (typically end of January), when I know my net business profit I calculate how much I want to put into
-- my employee contribution account pre-tax (typically not used since I fill that at primary employment)
-- my employee contribution account Roth (typically not used)
-- my employer profit sharing contributions (always pre-tax)
-- my after-tax contributions
So , I have 2 checks I drop off to Fidelity to be put into the accounts above. Another 2 checks (typically) for my wife.
The drop off for forms and checks takes me 5 minutes total and may be few minutes of waiting once I come in.

- second time I see Fidelity is when my employer after-tax contributions cleared, when I drop off form for rollover. Again , up to a minute of wait, 15 seconds talking to agent. No checks involved. this is how after-tax contributions go to Roth (accounts at Fidelity). Zero issues for far.

this is it. nothing more. 4th year now.

I do not contribute during the year because I simply do not know what my net business income is going to be until year ends..
You're right, it is ordinary income taxes. I was thinking it would be STCG taxes, similar to a taxable account, though these are effectively the same anyway. However, what happens if the contributions to your after-tax account lose money? Do you claim it as a capital loss as you would if you were tax loss harvesting?

I could do what you are doing but I don't like to wait till the end of the year to make my contributions. What do you do with the money for the rest of the year? Leave it in cash? My income is steady and regular and only determined by how many shifts I work. I would much rather have those earnings making money for me in the market.

I'm just surprised I have to drop the forms off at their office (or find a way to print and fax them), and that I can't just execute the transfer online. That doesn't seem like too much to ask.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Mon Nov 18, 2019 8:13 pm

cookymonster wrote:
Mon Nov 18, 2019 7:37 pm
simas wrote:
Mon Nov 18, 2019 4:26 pm
cookymonster wrote:
Mon Nov 18, 2019 10:24 am
I was hoping I could do the rollovers every time I got paid, but now I'm thinking I may just have to suck it up and pay the capital gains taxes. Maybe I'll at least roll the funds over right before each dividend payout.

Has anyone gotten Fidelity to be more accommodating? Or had better luck with another custodian?
did you mean income taxes (not capital gain taxes) above? after tax contributions can not generate capital gain taxes, they may result in recognized income for difference between amount rolled out and amount contributed.

I use Fidelity , same setup as yours - I am pretty happy with them but I deal with them 2 times a year at most
First time
- one day (typically end of January), when I know my net business profit I calculate how much I want to put into
-- my employee contribution account pre-tax (typically not used since I fill that at primary employment)
-- my employee contribution account Roth (typically not used)
-- my employer profit sharing contributions (always pre-tax)
-- my after-tax contributions
So , I have 2 checks I drop off to Fidelity to be put into the accounts above. Another 2 checks (typically) for my wife.
The drop off for forms and checks takes me 5 minutes total and may be few minutes of waiting once I come in.

- second time I see Fidelity is when my employer after-tax contributions cleared, when I drop off form for rollover. Again , up to a minute of wait, 15 seconds talking to agent. No checks involved. this is how after-tax contributions go to Roth (accounts at Fidelity). Zero issues for far.

this is it. nothing more. 4th year now.

I do not contribute during the year because I simply do not know what my net business income is going to be until year ends..
You're right, it is ordinary income taxes. I was thinking it would be STCG taxes, similar to a taxable account, though these are effectively the same anyway. However, what happens if the contributions to your after-tax account lose money? Do you claim it as a capital loss as you would if you were tax loss harvesting?

I could do what you are doing but I don't like to wait till the end of the year to make my contributions. What do you do with the money for the rest of the year? Leave it in cash? My income is steady and regular and only determined by how many shifts I work. I would much rather have those earnings making money for me in the market.

I'm just surprised I have to drop the forms off at their office (or find a way to print and fax them), and that I can't just execute the transfer online. That doesn't seem like too much to ask.
You can just put in as part of your bond portion keeping it in Vanguard Money market fund till the end of the year. At the end of the year just transfer it over to your after tax 401k.

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cookymonster
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by cookymonster » Mon Nov 18, 2019 11:46 pm

EnjoyIt wrote:
Mon Nov 18, 2019 8:13 pm
cookymonster wrote:
Mon Nov 18, 2019 7:37 pm
simas wrote:
Mon Nov 18, 2019 4:26 pm
cookymonster wrote:
Mon Nov 18, 2019 10:24 am
I was hoping I could do the rollovers every time I got paid, but now I'm thinking I may just have to suck it up and pay the capital gains taxes. Maybe I'll at least roll the funds over right before each dividend payout.

Has anyone gotten Fidelity to be more accommodating? Or had better luck with another custodian?
did you mean income taxes (not capital gain taxes) above? after tax contributions can not generate capital gain taxes, they may result in recognized income for difference between amount rolled out and amount contributed.

I use Fidelity , same setup as yours - I am pretty happy with them but I deal with them 2 times a year at most
First time
- one day (typically end of January), when I know my net business profit I calculate how much I want to put into
-- my employee contribution account pre-tax (typically not used since I fill that at primary employment)
-- my employee contribution account Roth (typically not used)
-- my employer profit sharing contributions (always pre-tax)
-- my after-tax contributions
So , I have 2 checks I drop off to Fidelity to be put into the accounts above. Another 2 checks (typically) for my wife.
The drop off for forms and checks takes me 5 minutes total and may be few minutes of waiting once I come in.

- second time I see Fidelity is when my employer after-tax contributions cleared, when I drop off form for rollover. Again , up to a minute of wait, 15 seconds talking to agent. No checks involved. this is how after-tax contributions go to Roth (accounts at Fidelity). Zero issues for far.

this is it. nothing more. 4th year now.

I do not contribute during the year because I simply do not know what my net business income is going to be until year ends..
You're right, it is ordinary income taxes. I was thinking it would be STCG taxes, similar to a taxable account, though these are effectively the same anyway. However, what happens if the contributions to your after-tax account lose money? Do you claim it as a capital loss as you would if you were tax loss harvesting?

I could do what you are doing but I don't like to wait till the end of the year to make my contributions. What do you do with the money for the rest of the year? Leave it in cash? My income is steady and regular and only determined by how many shifts I work. I would much rather have those earnings making money for me in the market.

I'm just surprised I have to drop the forms off at their office (or find a way to print and fax them), and that I can't just execute the transfer online. That doesn't seem like too much to ask.
You can just put in as part of your bond portion keeping it in Vanguard Money market fund till the end of the year. At the end of the year just transfer it over to your after tax 401k.
sounds pretty similar to just holding the money in my online savings account, no?

I sent the form in tonight via secure message after making a special trip in to work as I am flying out of town for 10 days tomorrow. I don't think I will have to mess with it again until 2020, though I'm not exactly sure how frequently I'll do the contributions and rollovers then. I am curious to hear if others experience less hassle with other brokerages.

EnjoyIt
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Tue Nov 19, 2019 1:35 am

cookymonster wrote:
Mon Nov 18, 2019 11:46 pm
EnjoyIt wrote:
Mon Nov 18, 2019 8:13 pm
cookymonster wrote:
Mon Nov 18, 2019 7:37 pm
simas wrote:
Mon Nov 18, 2019 4:26 pm
cookymonster wrote:
Mon Nov 18, 2019 10:24 am
I was hoping I could do the rollovers every time I got paid, but now I'm thinking I may just have to suck it up and pay the capital gains taxes. Maybe I'll at least roll the funds over right before each dividend payout.

Has anyone gotten Fidelity to be more accommodating? Or had better luck with another custodian?
did you mean income taxes (not capital gain taxes) above? after tax contributions can not generate capital gain taxes, they may result in recognized income for difference between amount rolled out and amount contributed.

I use Fidelity , same setup as yours - I am pretty happy with them but I deal with them 2 times a year at most
First time
- one day (typically end of January), when I know my net business profit I calculate how much I want to put into
-- my employee contribution account pre-tax (typically not used since I fill that at primary employment)
-- my employee contribution account Roth (typically not used)
-- my employer profit sharing contributions (always pre-tax)
-- my after-tax contributions
So , I have 2 checks I drop off to Fidelity to be put into the accounts above. Another 2 checks (typically) for my wife.
The drop off for forms and checks takes me 5 minutes total and may be few minutes of waiting once I come in.

- second time I see Fidelity is when my employer after-tax contributions cleared, when I drop off form for rollover. Again , up to a minute of wait, 15 seconds talking to agent. No checks involved. this is how after-tax contributions go to Roth (accounts at Fidelity). Zero issues for far.

this is it. nothing more. 4th year now.

I do not contribute during the year because I simply do not know what my net business income is going to be until year ends..
You're right, it is ordinary income taxes. I was thinking it would be STCG taxes, similar to a taxable account, though these are effectively the same anyway. However, what happens if the contributions to your after-tax account lose money? Do you claim it as a capital loss as you would if you were tax loss harvesting?

I could do what you are doing but I don't like to wait till the end of the year to make my contributions. What do you do with the money for the rest of the year? Leave it in cash? My income is steady and regular and only determined by how many shifts I work. I would much rather have those earnings making money for me in the market.

I'm just surprised I have to drop the forms off at their office (or find a way to print and fax them), and that I can't just execute the transfer online. That doesn't seem like too much to ask.
You can just put in as part of your bond portion keeping it in Vanguard Money market fund till the end of the year. At the end of the year just transfer it over to your after tax 401k.
sounds pretty similar to just holding the money in my online savings account, no?

I sent the form in tonight via secure message after making a special trip in to work as I am flying out of town for 10 days tomorrow. I don't think I will have to mess with it again until 2020, though I'm not exactly sure how frequently I'll do the contributions and rollovers then. I am curious to hear if others experience less hassle with other brokerages.
Yes, that is exactly what it sounds like. You can also use some of those no penalty CDs

I too am curious if others experience less hassle with other brokerage houses.

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Post by Luckywon » Tue Nov 19, 2019 1:57 am

EnjoyIt wrote:
Mon Nov 18, 2019 1:42 pm
I’m curious if anyone has experience with other brokerage houses other than fidelity.
I've opened up non prototype accounts for my solo 401K at eTrade. What ETrade has told me is that for rollovers or withdrawals from these accounts, I will have to complete a fillable pdf online, and then submit that form through uploading it to their secure messaging system, fax or mail, along with an image of a government-issued photo ID.

Deposits are easier and can be done through simple online transfers.

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Post by Saver21 » Wed Nov 20, 2019 10:17 pm

Would you mind posting links to the forms that Fidelity makes you submit with you employer profit sharing/employee post tax/ and rollover into Roth for the megabackdoor? I was planning to do this all online by wiring money into the first two accounts and then writing a check from the post tax account to the rollover.

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Post by rama13 » Thu Nov 21, 2019 2:10 am

Saver21 wrote:
Wed Nov 20, 2019 10:17 pm
Would you mind posting links to the forms that Fidelity makes you submit with you employer profit sharing/employee post tax/ and rollover into Roth for the megabackdoor? I was planning to do this all online by wiring money into the first two accounts and then writing a check from the post tax account to the rollover.
I wire funds into my after-tax account, then use this form to transfer to my Roth IRA:
https://www.fidelity.com/bin-public/060 ... drawal.pdf

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cookymonster
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Post by cookymonster » Thu Nov 21, 2019 2:51 am

I wish I could deposit money electronically or through wire. It says on my dashboard that non-prototype accounts are not eligible for this :x

Saver21
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Post by Saver21 » Thu Nov 21, 2019 10:02 am

Thanks for the forms!
To the prior response you can actually link the accounts online despite not having the option visible at fidelity. Just initiate the link from your bank (typical external account using the checkbook acct numbers you got from fidelity) and then you can just push money through to the pretax and the voluntary after tax accts

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cookymonster
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Post by cookymonster » Thu Nov 21, 2019 12:13 pm

Saver21 wrote:
Thu Nov 21, 2019 10:02 am
Thanks for the forms!
To the prior response you can actually link the accounts online despite not having the option visible at fidelity. Just initiate the link from your bank (typical external account using the checkbook acct numbers you got from fidelity) and then you can just push money through to the pretax and the voluntary after tax accts
Do these accounts have check writing features? I don't have a checkbook.

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Post by Spirit Rider » Thu Nov 21, 2019 12:25 pm

Regardless if they have check writing capability or not. They have ACH routing and account numbers. Fidelity has information on their website on this information.

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cookymonster
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Post by cookymonster » Thu Nov 21, 2019 1:31 pm

Spirit Rider wrote:
Thu Nov 21, 2019 12:25 pm
Regardless if they have check writing capability or not. They have ACH routing and account numbers. Fidelity has information on their website on this information.
The only account numbers I can find online are the investment account numbers that start with z followed by 8 digits. That doesn't seem adequate for an ACH transfer.
But I did see that I can order checks online (of course, requiring signed paper forms).
On a positive note, the IRR got done in 24 hours.
I do appreciate everyone's help. :sharebeer

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Post by Spirit Rider » Thu Nov 21, 2019 2:13 pm

As I pointed out. Fidelity has an explanation on how to convert the accounts with letter prefixes into ACH account numbers.

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cookymonster
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Post by cookymonster » Thu Nov 21, 2019 2:25 pm

Thanks. I just located this.

Basically it's 399000007, then the 8 digits after the z in the investment account number.
routing number 101205681

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by Lafder » Thu Nov 21, 2019 3:11 pm

I am confused about people saying they needed to set up a "trust" for their solo401k. Can anyone explain that? I thought the solo401k is for the business itself, but the assets are owned by the individual employees. What does a trust do for a solo 401k ? Why is a trust used? ( I don't have one)

Yes you need an EIN.

I am a solo practitioner with no employees. I am the employer and employee and plan administrator.

My solo401k is at Fidelity for no extra fees. I moved it from Vanguard so I could roll IRAs into it. I figured out how to set them up, and move the first one on my own.

I have just used pre-tax space, so no experience with soli401k and mega back door Roth's.

The fiduciary (Fidelity) sends a reminder about the 5500 with the amounts needed to fill it out. I find the 5500 form on ine and print it and fill it out and send it myself.

Fidelity has records of all deposits, growth etc as they do for their accounts.

I think anyone who can read and post on this forum can manage their own solo401k. It's really not hard.

I do use an accountant for my taxes, since all the tax questions/lines are confusing as heck to me.

Lafder

simas
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Post by simas » Thu Nov 21, 2019 4:29 pm

Lafder wrote:
Thu Nov 21, 2019 3:11 pm
I am confused about people saying they needed to set up a "trust" for their solo401k. Can anyone explain that? I thought the solo401k is for the business itself, but the assets are owned by the individual employees. What does a trust do for a solo 401k ? Why is a trust used? ( I don't have one)
it is in the documents you sign when you open a plan with one of the plan providers for additional flexibility like after-tax contributions, etc. Specifically among documents you receive is Adoption Agreement and Trust Agreement defining how plan works.

If you are using one of the prepackaged solutions from Fidelity/Vanguard, simply ignore.

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Post by Spirit Rider » Thu Nov 21, 2019 5:30 pm

As pointed out by @simas, Fidelity and Vanguard act as trustees of your Fidelity Self-employed 401k and Vanguard Individual 401k respectively.

Some of these websites offering one-participant 401k plans supporting the Mega Backdoor Roth are requiring you to set up your own trust.

However, the reality is that ERISA explicitly does not require a trust for one-participant 401k plans. In fact, E-Trade and TD Ameritrade do not act at as trustees for their one-participant 401k plans. By default, you are the trustee of these two plans.

All of the 401k plans at your employer are ERISA plans requiring a trust. That is what protects your assets from your employer and their creditors.

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Post by knightrider » Mon Dec 02, 2019 11:03 am

After reading most of this thread, I have concluded Fidelity should be fine for my needs. The added complexity and fees with the other plan providers doesn't seem worth it.. So if I understand correctly, Fidelity does not allow mega back door? And I can contribute 19k + ~20% of my earnings ( around 25k in my case ).. This puts me at 36k/year which is more than enough for retirement. I understand with mega back door I could go up higher, but I don't really have that much extra to put in anyways..

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Post by knightrider » Tue Dec 03, 2019 9:55 am

I gave this some more thought and it seems the $500 fee these companies charge basically negates any benefits from doing a MBR.. It's as if your earnings are being taxed at some very high rate, which defeats the whole purpose of MBR. Am I correct? Or is it still worth it despite the $500 annual fee?

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jt4
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Tue Dec 03, 2019 4:33 pm

knightrider wrote:
Tue Dec 03, 2019 9:55 am
I gave this some more thought and it seems the $500 fee these companies charge basically negates any benefits from doing a MBR.. It's as if your earnings are being taxed at some very high rate, which defeats the whole purpose of MBR. Am I correct? Or is it still worth it despite the $500 annual fee?
knightrider -- the $500 fee is a one-time cost, so assuming you keep the account for a while, the yearly cost is not that much... (of course, if you only plan to keep open a Solo 401k for a couple of years, maybe you should think about this cost)

For simplicity, let's assume that the non-prototype Solo 401k plan allows you to contribute an extra $10K in voluntary after-tax contributions each year for which you use for the MBR. How much is an extra $10K in Roth tax-advantaged space worth to you?

Let's assume that we invest that $10K in the SP500. The SP500 historically pays around a 2% yearly dividend ($200/year). Assuming this dividend is qualified, for federal taxes, you'd pay the long-term capital gains on this amount (15% --> $30/year) and (typically) your marginal state tax rate (for me ~10% --> $20/year). Therefore, this $10K in extra Roth space saves me $50/year in taxes on the dividends alone.

BUT WAIT, don't these non-prototype plans cost ~$100/yr to maintain, so they're still costing me an extra $50/year ($100/yr - $50/yr tax savings)? Not so because you also save on the capital gains for any growth in value. If you assume a measly 4% growth rate, your $10K will turn into $15K after 10 years. If you sold after 10 years in a taxable account, you'd owe 15% federal long terms capital gains tax + (for me) 10% state tax on the $5K in gains which is equal to $1250. Of course, in a Roth account, you'd avoid this so your total savings in a Roth account (in this simple example is $1750 over 10 years while the plan costs are $1500 over this period).

NOW these numbers are only for a measly $10K of extra Roth space (enabled by MBR in a non-prototype Solo 401k plan). The more money you're able to put away through MBR, the better your savings will be. For example, the numbers get much better if you're able to put away $10K extra for each of the 10 years giving you an extra $100K of Roth advantaged space after 10 years. (As an example the savings for dividends alone will be $50 for Year 1, $100 for Year 2, $150 for Year 3, $200 for Year 4, ...)

Of course, your numbers may be different, but I hope this helps quantify the savings. Ultimately, the more extra money you put away through voluntary after-tax contributions AND the longer you hold the account, the more savings you have!

knightrider
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by knightrider » Wed Dec 04, 2019 9:41 am

jt4 wrote:
Tue Dec 03, 2019 4:33 pm
knightrider -- the $500 fee is a one-time cost, so assuming you keep the account for a while, the yearly cost is not that much... (of course, if you only plan to keep open a Solo 401k for a couple of years, maybe you should think about this cost)
You are correct, it is a $100 annual fee, not $500. My mistake. However, would you agree that even this $100 fee could make MBR pointless IF you invest less than $10k in low risk funds?
Last edited by knightrider on Wed Dec 04, 2019 9:59 am, edited 1 time in total.

EnjoyIt
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Wed Dec 04, 2019 9:46 am

knightrider wrote:
Wed Dec 04, 2019 9:41 am
jt4 wrote:
Tue Dec 03, 2019 4:33 pm
knightrider -- the $500 fee is a one-time cost, so assuming you keep the account for a while, the yearly cost is not that much... (of course, if you only plan to keep open a Solo 401k for a couple of years, maybe you should think about this cost)
You are correct, it is a $100 annual fee, not $500. My mistake. However, would you agree that even this $100 fee could make MBR pointless IF you invest less than $10k in low risk funds?
Yes, it would be silly to do this and then invest the money in municipal bonds.

simas
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Wed Dec 04, 2019 4:32 pm

knightrider wrote:
Wed Dec 04, 2019 9:41 am
jt4 wrote:
Tue Dec 03, 2019 4:33 pm
knightrider -- the $500 fee is a one-time cost, so assuming you keep the account for a while, the yearly cost is not that much... (of course, if you only plan to keep open a Solo 401k for a couple of years, maybe you should think about this cost)
You are correct, it is a $100 annual fee, not $500. My mistake. However, would you agree that even this $100 fee could make MBR pointless IF you invest less than $10k in low risk funds?
not sure... think of all of the Roth conversion questions people are asking, the Roth ladders, etc. People jump at ability to convert to Roth at the 'very low current tax rates' . Here you are with ability to do MBR for essentially 1% in tax ($100 out of 10k) and you think it is pointless?? tell it to everyone who is doing Roth conversions, paying 12% (1200 out of 10,000) and thinking they have an amazing deal..

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jt4 » Wed Dec 04, 2019 8:51 pm

knightrider wrote:
Wed Dec 04, 2019 9:41 am
jt4 wrote:
Tue Dec 03, 2019 4:33 pm
knightrider -- the $500 fee is a one-time cost, so assuming you keep the account for a while, the yearly cost is not that much... (of course, if you only plan to keep open a Solo 401k for a couple of years, maybe you should think about this cost)
You are correct, it is a $100 annual fee, not $500. My mistake. However, would you agree that even this $100 fee could make MBR pointless IF you invest less than $10k in low risk funds?
Yes, obviously a non-prototype plan is not worth $100/yr if you only invest $5. :D

The more you invest through the MBR, the more you save! You'll have to work out your personal numbers using the framework I provided and report back to us. :D

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by knightrider » Thu Dec 05, 2019 9:49 am

simas wrote:
Wed Dec 04, 2019 4:32 pm
tell it to everyone who is doing Roth conversions, paying 12% (1200 out of 10,000) and thinking they have an amazing deal..
I am not sure I am following you on this "paying 12%" ? Is that the return people are getting from investing in hi risk funds or something else?

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by jacoavlu » Thu Dec 05, 2019 10:07 am

the mega backdoor Roth “creates” additional Roth space that you otherwise don’t have. For me, spending $700 upfront and $125 per year to create $20k or so of additional Roth space per year is a no brainer

EnjoyIt
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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Thu Dec 05, 2019 10:49 am

knightrider wrote:
Thu Dec 05, 2019 9:49 am
simas wrote:
Wed Dec 04, 2019 4:32 pm
tell it to everyone who is doing Roth conversions, paying 12% (1200 out of 10,000) and thinking they have an amazing deal..
I am not sure I am following you on this "paying 12%" ? Is that the return people are getting from investing in hi risk funds or something else?
Simas is alluding to people doing traditional to Roth conversions up to the 12% tax bracket and are happy to do it. This is exactly what we will be doing when we stop collecting wages. Any dollar I can covert for 12% is a dollar I won't be paying 22% in the future. What's worse, not only will I be paying 22% on those withdrawals, I will have to pay capital gains tax at 15% on my gains as well. The goal is to try and stay below the top of the 12% tax bracket

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by knightrider » Thu Dec 05, 2019 11:22 am

jacoavlu wrote:
Thu Dec 05, 2019 10:07 am
the mega backdoor Roth “creates” additional Roth space that you otherwise don’t have. For me, spending $700 upfront and $125 per year to create $20k or so of additional Roth space per year is a no brainer
Is it a no-brainer if fees are more like $200/year and it only creates 10k of roth space AND you are a conservative investor? I believe the fees for Ascensus are in the $200/year range..

To me it doesn't feel worth it, but I haven't run the numbers thoroughly. Plus I have other issues with how complex it is and whether this whole thing will be around in 5+ years. To me, one can get better bang for your time doing credit card churning.. Complexifying investments is something I am trying to avoid..

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Post by retiredjg » Thu Dec 05, 2019 4:43 pm

I don't know if it is a no-brainer or not. But I look at it this way. It would cost you $200 a year to get $10,000 into Roth in that year. Over your lifetime, what's the liklihood that $10k is going to produce more than $200 in earnings which will never be taxed? Seems pretty likely to me, even invested in a conservative manner.

A 2% return would be $200 just in one year on your $10k contribution. So maybe it is a no-brainer if I'm not overlooking something.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by EnjoyIt » Thu Dec 05, 2019 5:06 pm

knightrider wrote:
Thu Dec 05, 2019 11:22 am
jacoavlu wrote:
Thu Dec 05, 2019 10:07 am
the mega backdoor Roth “creates” additional Roth space that you otherwise don’t have. For me, spending $700 upfront and $125 per year to create $20k or so of additional Roth space per year is a no brainer
Is it a no-brainer if fees are more like $200/year and it only creates 10k of roth space AND you are a conservative investor? I believe the fees for Ascensus are in the $200/year range..

To me it doesn't feel worth it, but I haven't run the numbers thoroughly. Plus I have other issues with how complex it is and whether this whole thing will be around in 5+ years. To me, one can get better bang for your time doing credit card churning.. Complexifying investments is something I am trying to avoid..
Sure, it does add complexity and is the complexity worth it is a personal decision. Financially/mathematically if you hold the $10k long enough it will pay for itself plus provide you with more options in retirement. Is that worth the effort and the increased complexity on your taxes? That is for you to decide. Obviously plenty of people believe it to be worth it.

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Re: Has anyone used MySolo401k.com, DiscountSolo401k.com, or Solo401k.com?

Post by simas » Fri Dec 06, 2019 8:49 am

jacoavlu wrote:
Thu Dec 05, 2019 10:07 am
the mega backdoor Roth “creates” additional Roth space that you otherwise don’t have. For me, spending $700 upfront and $125 per year to create $20k or so of additional Roth space per year is a no brainer
- the tax advantaged space (currently) offered by Roth type conduit accounts (sub plans within 401k, rIRAs ,etc.) are significant , numerous, and therefore highly desired.

- the taxing authorities understand the impact of such accounts (loss of tax revenue, etc.) and implemented in laws limits on how much could be contributed to IRA as well as income limits of when such contributions allowed

- being able to fill up that space when you would otherwise not eligible to ( backdoor Roth IRA) is again one of the common topics here. People spend time and effort, including having to figure out pro-rated rules, non-deductible basis, etc. for opportunity to put a lot less than 10k a year into that tax space.

- MBR offers significant benefits and is highly sought for by people as evidenced by many threads of 'how do I convince my employer to offer something like this'. It also lessens the pressure to save in tax advantaged space and having to then deal with 'tax torpedos' (look up RMD threads, the planning to reduce amounts that would be required to withdraw, conversion strategies to pay income taxes now just to move things out of tax deferred into Roth space. 15% haircut of income tax now - fantastic option when you would be paying massive taxes on your SS income when RMD hits).

- as self employed individual with s401k , for wide variety of income ranges, this is an amazing benefit. conservative investor/not conservative, who cares? you (and your spouse if materially participating and therefore are in qualified joint partnership) can deposit tens of thousands of dollars into this space for virtually nothing at all.

so yes, it is pretty clear cut to me. I am glad to have found the TFB article some years ago and when stumbling into consulting accidentally used this to contribute close to 100k between DW and myself in 2017/2018 tax years. I used discountsolo401k.com as my plan/document provider and as written before pretty happy with them.


Now, nobody is going to force @knightrider to use this or that option, go this or that path. If you have such opportunity and you are not using it, financially it may be unwise, however it is your life, your choice, your problems.

Lastly, on complexity longer term, etc. If you no longer have conditions that make this very favorable (your self employed income dropped because you taken different career option/ W2 position ,etc), who says you must maintain this plan forever? wind down the plan, file necessary form, and move on, you are not on the hook for $100 a year for the rest of your life (this isn't a timeshare).

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