Author Topic: ETF and Fidelity Solo 401K  (Read 3871 times)

Fuzz

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ETF and Fidelity Solo 401K
« on: December 20, 2014, 10:31:56 AM »
I opened a Fidelity solo 401K account on the theory that competition with Vanguard would force Fidelity to keep the fees on the Spartan Funds equal to the fees on the Admiral Shares. Essentially, I think Fidelity has to match Vanguard's low cost offerings to keep business, but because fewer Fidelity customers care about low fees, Fidelity has more profits to reinvest in its website and customer service. On to the question:

Now that I have the solo 401K opened, I find out that the only way I can contribute to it is via check mailed to Fidelity (why wasn't this mentioned in any of the zillion reviews out there). There is not electronic funds transfer available for my Keogh profit sharing account. The representative said that this was to prevent over-contribution. The representative offered the work around that I could open a separate taxable Fidelity account, contribute to that via ETF, and then call Fidelity and have a representative make the transfer from the taxable account to the retirement account, which makes the bookkeeping really screwy for my business.

So my two options to contribute apparently are:

(1) mail them a check.
(2) deposit the money to the wrong account and then call them to transfer it to the right account.

It's 2014 and ain't nobody got time for that.

Do any other providers of low cost index funds allow ETF to a solo 401K? Schwab, Vanguard?

notmyhand

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Re: ETF and Fidelity Solo 401K
« Reply #1 on: December 20, 2014, 10:54:20 AM »
So odd.  Vanguard's solo 401k allows for electronic transfers.    Never had an issue.

pbkmaine

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Re: ETF and Fidelity Solo 401K
« Reply #2 on: December 20, 2014, 11:10:13 AM »
Fidelity's ownership model is very different from Vanguard's, and that affects the cost, too. Fidelity is owned by the Johnson family, who are billionaires. They get a sizable slice of the profits. Vanguard is owned by its funds, which are owned by the  shareholders (you and me). Their model is about low costs.

Breaker

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Re: ETF and Fidelity Solo 401K
« Reply #3 on: December 20, 2014, 11:53:32 AM »
I would verify this info with someone else or another branch at Fidelity.  Sometimes employees don't really know what they are talking about.

See if Fidelity has a checking account.  If so I bet they will take electronic transfers to that account and then you can transfer the money from there to your 401K on line yourself.

It just sounds odd to me.

Fuzz

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Re: ETF and Fidelity Solo 401K
« Reply #4 on: December 20, 2014, 05:05:48 PM »
I would verify this info with someone else or another branch at Fidelity.  Sometimes employees don't really know what they are talking about.

See if Fidelity has a checking account.  If so I bet they will take electronic transfers to that account and then you can transfer the money from there to your 401K on line yourself.

It just sounds odd to me.


Two good ideas. I'm going to call back on Monday, since I think I got someone who didn't really know the answer and had to look it up. If it doesn't work out, then I'll go look at Vanguard. Assuming I keep this account for years, it makes sense to get the ETF.

Fidelity's ownership model is very different from Vanguard's, and that affects the cost, too. Fidelity is owned by the Johnson family, who are billionaires. They get a sizable slice of the profits. Vanguard is owned by its funds, which are owned by the  shareholders (you and me). Their model is about low costs.

Yes, but for the solo 401K people, I don't think Vanguard offers it's best funds. See http://www.bogleheads.org/forum/viewtopic.php?t=67378.

bacchi

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Re: ETF and Fidelity Solo 401K
« Reply #5 on: December 20, 2014, 06:09:02 PM »
Yes, but for the solo 401K people, I don't think Vanguard offers it's best funds.

You can buy the equivalent ETFs (VTI, VXUS, etc.) with the same ER as admiral funds.

I got tired of mailing in a paper check to Fidelity and that's why I have a Vanguard account too.

BlueHouse

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Re: ETF and Fidelity Solo 401K
« Reply #6 on: December 20, 2014, 07:13:26 PM »
Does Fidelity allow for electronic deposits of checks?  Get the app, snap a pic, and you're done. 

Dr. A

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Re: ETF and Fidelity Solo 401K
« Reply #7 on: December 20, 2014, 07:29:26 PM »
That's crazy. You should absolutely open a solo 401k with Vanguard, and then call up Fidelity and make sure they know exactly why you're leaving when you roll over the account.

I've got a solo 401k set up with Vanguard. While I have not actually contributed to it (will do the first one after my wife closes the books on 2014) I've done a dry-run just to see how it works. Super easy to make both employee and employer contributions electronically from your bank account.