Author Topic: Starting a solo 401k.....recommendations?  (Read 675 times)

DocMcStuffins

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Starting a solo 401k.....recommendations?
« on: August 11, 2018, 08:36:09 AM »
Hey folks, my wife has a side hustle and we are getting started with a solo 401k plan. Wanted to hear from anyone that has one and if they are happy with their provider. Obviously I checked out vanguard and was going through the paperwork. Didn’t know if anyone used someone else and why they choose a different  provider.  Cheers.

DocMcStuffins

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Re: Starting a solo 401k.....recommendations?
« Reply #1 on: August 11, 2018, 09:46:14 AM »
Should I move this to the investment forum?

Paul der Krake

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Re: Starting a solo 401k.....recommendations?
« Reply #2 on: August 11, 2018, 09:48:04 AM »
I have one with Fidelity. No fees anywhere, just a couple forms to fill and mail and you're on the move. Only downside is that you need to write a check every time you want to make a contribution.

Miss Piggy

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Re: Starting a solo 401k.....recommendations?
« Reply #3 on: August 11, 2018, 11:57:34 AM »
Mine is with T Rowe Price, and I've been happy with it. Easy setup, easy to make my 1-time contribution each year when my accountant tells me how much that can be (on top of my "real job" 401k). I recently rolled another (non-solo, from a former employer) 401k into my solo 401k, and I was very happy about being able to do that (they don't all allow this). (I honestly can't recall why I wanted to do this instead of roll it into my Vanguard IRA. Surely I had a good reason at the time???)

CoffeeAndDonuts

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Re: Starting a solo 401k.....recommendations?
« Reply #4 on: August 11, 2018, 11:58:10 AM »
Schwab for us.

One factor for us was that Schwab allows in service distributions. I'm not sure if all do.

We put this into play while doing backdoor Roth's. It's not strictly required as the in service distributions are useful after a backdoor Roth in getting the money back out of the i401k when it suited us. For example, Merrill edge regularly offers good bonuses on moving brokerage assets there and so we can do an in-service distribution from Schwab to a rollover traditional IRA at Merrill to pick up $600 to $1000 occasionally.

Also useful if you want to do 401k to Roth conversions occasionally.

One annoyance is that it won't count toward the assets used to determine the fee reduction on the Schwab platinum amex. That said, if I cared more, I could always do an in-service distribution from Schwab i401k to Schwab rollover IRA with no tax consequence and get the fee reduction

I'm not sure if any i401k allows loans but Schwab doesn't. Not a factor to me.

I wish one of the major brokerages made megaroth via i401k possible but none did when I researched. Specifically, Schwab doesn't allow after tax contributions to i401k.

All in all I'm happy with Schwab and love the i401k generally!

terran

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Re: Starting a solo 401k.....recommendations?
« Reply #5 on: August 12, 2018, 05:51:20 AM »
Fidelity here too.

Here's a good summary that matches what I know of the various options: https://www.whitecoatinvestor.com/where-to-open-your-solo-401k/. Read/search the comments for more info on TD Ameritrade. It seems like they might be one of the more flexible options (allowing rolling in of IRAs, and Roth contributions). Edit: but it also sounds from the comments like they're kind of tough to deal with.

One factor for us was that Schwab allows in service distributions. I'm not sure if all do.

Interesting, so you've actually rolled schwab solo 401(k) funds out into an IRA while keeping the 401(k) open? If so, that's a pretty cool feature I haven't heard about from any premade solo 401(k) yet. It might be useful if I need to do some small Roth conversions to optimize the new pass through deduction.
« Last Edit: August 12, 2018, 05:59:53 AM by terran »

moonpalace

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Re: Starting a solo 401k.....recommendations?
« Reply #6 on: August 12, 2018, 06:14:21 AM »
We've been using Vanguard for ours for a couple years and it's been great. Initial setup fee and some paperwork, but since then it's just been monthly visit to the website to make contributions. Good fund choices, although you don't have the full range of Vanguard funds in a solo 401k for some reason (no Admiral shares).

FallenTimber

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Re: Starting a solo 401k.....recommendations?
« Reply #7 on: August 12, 2018, 02:34:08 PM »
My wife and I use Vanguard for both of our Roth IRA accounts, so we went with Vanguard for her Solo Roth 401k as well. Vanguard has always been most in line with our investment style (index funds) so that’s the route we went. No complaints here, and they’re always extremely helpful when you call them (not to mention you speak to a real human without any wait times).

We contribute monthly via their online transfer, so no checks to mail either.

Telecaster

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Re: Starting a solo 401k.....recommendations?
« Reply #8 on: August 12, 2018, 07:00:12 PM »
Fidelity here.  Looked at Vanguard, but it was simpler to set up with Fidelity. 

CoffeeAndDonuts

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Re: Starting a solo 401k.....recommendations?
« Reply #9 on: August 13, 2018, 01:07:03 AM »

One factor for us was that Schwab allows in service distributions. I'm not sure if all do.

Interesting, so you've actually rolled schwab solo 401(k) funds out into an IRA while keeping the 401(k) open? If so, that's a pretty cool feature I haven't heard about from any premade solo 401(k) yet. It might be useful if I need to do some small Roth conversions to optimize the new pass through deduction.

Good point about using 401k to Roth with the sec 199 business deduction. I'd not thought to call that out in this conversation but was aware of that technique as it may apply to us in 2020 or beyond.

I've not actually done the in service distributions but quizzed reps during sign up pretty throughly. Reps can be wrong so I checked plan docs. They look good.

https://www.schwab.com/public/file/P-619651/BDL50374-04-NC_PPA_401k_Basic_Plan_Doc_Final_Web.pdf

Section 5.01 part c says:

C. Distributions During Employment
1. In-Service Distributions—A Participant may elect to receive an in-service distribution of all or part of their Individual Account attributable to Employer Contributions, other than those described in Plan Sections 5.01(A)(2), upon meeting one of the following requirements.
a. Participant for Five or More Years—An Employee who has been a Participant in the Plan for fi ve or more years may withdraw up to the entire Individual Account.
b. Participant for Less than Five Years—An Employee who has been a Participant in the Plan for less than fi ve years may withdraw only the amount that has been in their Individual Account attributable to Employer Contributions for at least two full Plan Years, measured
from the date such contributions were allocated.


terran

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Re: Starting a solo 401k.....recommendations?
« Reply #10 on: August 13, 2018, 05:30:21 AM »

One factor for us was that Schwab allows in service distributions. I'm not sure if all do.

Interesting, so you've actually rolled schwab solo 401(k) funds out into an IRA while keeping the 401(k) open? If so, that's a pretty cool feature I haven't heard about from any premade solo 401(k) yet. It might be useful if I need to do some small Roth conversions to optimize the new pass through deduction.

Good point about using 401k to Roth with the sec 199 business deduction. I'd not thought to call that out in this conversation but was aware of that technique as it may apply to us in 2020 or beyond.

I've not actually done the in service distributions but quizzed reps during sign up pretty throughly. Reps can be wrong so I checked plan docs. They look good.

https://www.schwab.com/public/file/P-619651/BDL50374-04-NC_PPA_401k_Basic_Plan_Doc_Final_Web.pdf

Section 5.01 part c says:

C. Distributions During Employment
1. In-Service Distributions—A Participant may elect to receive an in-service distribution of all or part of their Individual Account attributable to Employer Contributions, other than those described in Plan Sections 5.01(A)(2), upon meeting one of the following requirements.
a. Participant for Five or More Years—An Employee who has been a Participant in the Plan for fi ve or more years may withdraw up to the entire Individual Account.
b. Participant for Less than Five Years—An Employee who has been a Participant in the Plan for less than fi ve years may withdraw only the amount that has been in their Individual Account attributable to Employer Contributions for at least two full Plan Years, measured
from the date such contributions were allocated.

Thanks for looking that up!

So it sounds like only employer contributions, not employee salary deferral contributions are eligible. I wonder why that is -- interesting.

Slow&Steady

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Re: Starting a solo 401k.....recommendations?
« Reply #11 on: August 13, 2018, 08:52:09 AM »
We will be looking to set up a solo 401k for my SO in 2019 or early 2020 and just assumed that we would be best with Vanguard or Fidelity.  Roth IRAs are with Vanguard so I figured that would be the easiest.

I hadn't thought about some of the points that have been brought up.

Slow&Steady

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Re: Starting a solo 401k.....recommendations?
« Reply #12 on: August 13, 2018, 08:55:22 AM »
How does everyone handle the employee vs employer contributions?  I am thinking setting it up as $ for $ match would be the easiest, as the business income not steady at all. 

ETA: Hmm, this sparked me to start researching.  It looks like a $ for $ match is not an option, I will need to do a lot more research before we start this next year.
« Last Edit: August 13, 2018, 09:00:20 AM by Slow&Steady »

dandarc

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Re: Starting a solo 401k.....recommendations?
« Reply #13 on: August 13, 2018, 08:59:37 AM »
eTrade - I was regretting it for a bit when I became more enlightened on the importance of expense ratios, but now they offer the good Schwab funds as no transaction fees.

HAPPYINAZ

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Re: Starting a solo 401k.....recommendations?
« Reply #14 on: August 13, 2018, 09:34:58 AM »
I use Etrade, zero fees to setup acct and they were running a signup bonus which got us free trades for a couple months plus $200 to open the solo 401K (we already had other accts with them).  So, not only did it not cost anything to open the acct, they paid me to do it.  And if you like index investing, they have numerous ETFs (including vanguard and schwab index ETFs as well as others like ITOT ETF) that you can acquire for no trading fees.  Expense ratios for those ETFs are super low as well (generally 0.03 or 0.04%).  I really like the software and presentation in my etrade accts versus my schwab acct.  I have used etrade for maybe 20 years and really like them. 
« Last Edit: August 13, 2018, 09:49:50 AM by HAPPYINAZ »

DocMcStuffins

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Re: Starting a solo 401k.....recommendations?
« Reply #15 on: August 14, 2018, 06:13:12 PM »
Thanks everyone. Great info to consider.

Much Fishing to Do

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Re: Starting a solo 401k.....recommendations?
« Reply #16 on: August 14, 2018, 06:48:02 PM »
Did Vanguard.  Has seemed very simple to set up and have maxed out doing quarterly contributions very easily.  I actually messed up one time on employer side contribution and they were very helpful in fixing it on the phone, which I thought for sure would be a much bigger pain so very happy.