Author Topic: Low-cost 401k options for small (3-4 person business)?  (Read 1896 times)

electriceagle

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Low-cost 401k options for small (3-4 person business)?
« on: January 06, 2018, 01:30:20 PM »
I'm trying to understand the small business 401k landscape.

If I want to start a solo 401k, I can go to etrade, pay no fees and have traditional/roth, roll-in/roll-out/conversion, etc. E-trade makes about $7 on each trade. I assume that they also lend my money/securities on the side.

Once I start looking at 401ks for 3-4 person partnerships, I see length-of-service rules dicatated by brokerages, 4-figure signup fees, 3-figure annual fees, and restrictions on roll-in/roll-out.

Is there anyone who offers a 401k for small partnerships (2-4 people) without excessive fees or restrictions? If not, why not.

mintleaf

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #1 on: January 06, 2018, 03:15:48 PM »
I believe that there are non-trivial filing and administrative requirements for 401k plans. For the solo version, they can us a template mechanism where they only have to register with the IRS once, which is why that's cheap-to-free, but once you go beyond that it's all customized.

There's also the attitude of anything "business" implying "hey, a few hundred bucks is just a rounding error, right?"

khizr

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #2 on: January 06, 2018, 03:16:17 PM »
Yep I highly recommend this one, used it at my last business:

https://www.guideline.com/

hit me up with any questions, super low fees, awesome interface, great little startup.
« Last Edit: January 07, 2018, 12:51:36 PM by khizr »

profgubler

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #3 on: January 06, 2018, 08:41:16 PM »
Why 401k? We run a small business and do matching with a simple IRA. It works well and easy fewer requirements.


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electriceagle

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #4 on: January 07, 2018, 05:53:03 PM »
Yep I highly recommend this one, used it at my last business:

https://www.guideline.com/

hit me up with any questions, super low fees, awesome interface, great little startup.

Thanks. This is useful information.

$500/yr with no "assets under management" fees is reasonable. The only thing that I worry about is "Guideline-managed portfolios composed of select Vanguard funds."

This looks like a possibility if they let clients simply buy the Vanguard funds directly.

khizr

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #5 on: January 07, 2018, 05:59:55 PM »
Yep I highly recommend this one, used it at my last business:

https://www.guideline.com/

hit me up with any questions, super low fees, awesome interface, great little startup.

Thanks. This is useful information.

$500/yr with no "assets under management" fees is reasonable. The only thing that I worry about is "Guideline-managed portfolios composed of select Vanguard funds."

This looks like a possibility if they let clients simply buy the Vanguard funds directly.
It is a managed portfolio when I was using it, in the sense, you choose risk level and then they manage what that translates too in terms of Vanguard funds.

I think you might be able to directly say x% of x, but not totally sure... worth asking.

firescape

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #6 on: January 07, 2018, 06:29:28 PM »
Why 401k? We run a small business and do matching with a simple IRA. It works well and easy fewer requirements.


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We currently have a Simple IRA and they are ok, but have limitations. Only 12,500 contribution per year, 401k is 18,000 or higher. The simple match % is usually lower than a 401k. 401k can be customized to offer owners a different deal than employees. Simple has really limited funds to choose from, 401k's usually offer more choices. I think a 401k looks better to prospective employees too.

We're having the same struggle currently with our business. We have used a Simple IRA for years, but realizing that switching over to a 401k, through Vanguard, is pricey. They say about $3500/year to administer the plan, after a $1000 initial fee. Although, if you figure in the tax savings to owners that come from being able to put away 18k or more into pretax accounts, it may be a better deal. I'm going to run this by our CPA and see what he says.

katsiki

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #7 on: January 07, 2018, 06:37:18 PM »
Guideline looks very interesting!  Fund listing is here: https://www.guideline.com/funds

jeff2017

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #8 on: January 07, 2018, 08:08:02 PM »
Why 401k? We run a small business and do matching with a simple IRA. It works well and easy fewer requirements.


Sent from my iPhone using Tapatalk

We currently have a Simple IRA and they are ok, but have limitations. Only 12,500 contribution per year, 401k is 18,000 or higher. The simple match % is usually lower than a 401k. 401k can be customized to offer owners a different deal than employees. Simple has really limited funds to choose from, 401k's usually offer more choices. I think a 401k looks better to prospective employees too.

We're having the same struggle currently with our business. We have used a Simple IRA for years, but realizing that switching over to a 401k, through Vanguard, is pricey. They say about $3500/year to administer the plan, after a $1000 initial fee. Although, if you figure in the tax savings to owners that come from being able to put away 18k or more into pretax accounts, it may be a better deal. I'm going to run this by our CPA and see what he says.

Presently in the same shoes as OP and trying to figure this out. My first thought was Vanguard as well, but they told me the same fees you are mentioning above.

Posting to follow OP. I'm planning to research further on this and start making phone calls soon to learn more. We are certainly not the target market for many out there.

jeff2017

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #9 on: January 07, 2018, 08:20:03 PM »
Guideline & Employee Fiduciary seem to be ideal fits for small companies based on what I've seen on MMM forums and Boglesheads.

electriceagle

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #10 on: January 09, 2018, 08:27:57 AM »
Yep I highly recommend this one, used it at my last business:

https://www.guideline.com/

hit me up with any questions, super low fees, awesome interface, great little startup.

Thanks. This is useful information.

$500/yr with no "assets under management" fees is reasonable. The only thing that I worry about is "Guideline-managed portfolios composed of select Vanguard funds."

This looks like a possibility if they let clients simply buy the Vanguard funds directly.
It is a managed portfolio when I was using it, in the sense, you choose risk level and then they manage what that translates too in terms of Vanguard funds.

I think you might be able to directly say x% of x, but not totally sure... worth asking.

Upon further examination, it looks like they have "custom portfolios", which allow you to choose your own Vanguard funds. :)

That makes them worth contacting.

Fuzz

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #11 on: January 13, 2018, 07:51:50 PM »
I think guideline ties in with gusto payroll, which is a nice payroll service. But I am in a similar situation and wasn't able to find something satisfying. I'd do a SEP-IRA with Vanguard and deal with the 25% limitation.

Also, stay away from Fidelity. Last I checked, you are required to mail paper checks to make contributions to your biz retirement account. Dumb.

SwordGuy

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #12 on: January 13, 2018, 08:18:25 PM »
My current employer uses EmployerFiduciary.   That tells me it's got to be cheap.   

MJseast

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #13 on: January 15, 2018, 09:17:25 PM »
I'm also researching this topic and found the following article from a few years ago. https://www.nytimes.com/2015/09/12/your-money/401-k-options-for-small-businesses.html

It lists some low-cost 401K providers towards the end of the article. So far from my researching, I'm liking Guideline (mainly because of price and Vanguard funds).




tawyer

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Re: Low-cost 401k options for small (3-4 person business)?
« Reply #14 on: January 15, 2018, 09:48:23 PM »
Yep I highly recommend this one, used it at my last business:

https://www.guideline.com/

hit me up with any questions, super low fees, awesome interface, great little startup.

Thanks. This is useful information.

$500/yr with no "assets under management" fees is reasonable. The only thing that I worry about is "Guideline-managed portfolios composed of select Vanguard funds."

This looks like a possibility if they let clients simply buy the Vanguard funds directly.
It is a managed portfolio when I was using it, in the sense, you choose risk level and then they manage what that translates too in terms of Vanguard funds.

I think you might be able to directly say x% of x, but not totally sure... worth asking.

Upon further examination, it looks like they have "custom portfolios", which allow you to choose your own Vanguard funds. :)

That makes them worth contacting.
I came to this thread to say Guideline, too. The custom portfolios include a range of vanguard mutual funds, each of which charges a couple of basis points in expense ratio over what vanguard would charge in a brokerage account.