Author Topic: Best place for sole proprietor income  (Read 1189 times)


  • Pencil Stache
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Best place for sole proprietor income
« on: February 11, 2015, 05:55:43 PM »
I work as a sole proprietor/independent contractor so no company-wide 401k options.  I'm looking to shelter all my income for this year, and since it's my first year in business I don't anticipate I will make much... will probably make around $25k, hoping more for $40k though. 

Anyway, I already maxed my Roth, will be maxing my HSA, and thinking next should be Roth Solo 401k.  I anticipate my income will go up next year and the years following, so that is when I'll starting doing traditional solo 401k contributions.

Is my thinking correct? Is there anything I'm missing? I spoke with a Vanguard rep a few weeks ago and he kept talking to me about doing a SEP instead but I couldn't quite understand why and the way he was explaining it wasn't clear so I decided to file it away and re-visit at a later time.


  • Magnum Stache
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Re: Best place for sole proprietor income
« Reply #1 on: February 11, 2015, 08:44:29 PM »
Yeah, I'm not getting the SEP over a solo 401k thing. Vanguard provides all the 401k paperwork and notices and whatnot. It's marginally more complicated but not enough to worry about.


  • Handlebar Stache
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Re: Best place for sole proprietor income
« Reply #2 on: February 12, 2015, 07:08:04 AM »
Maybe it's changed now but Vanguard was not offering the admiral class of index funds through it's Solo 401(k) plan, and you had to instead buy the higher fee investor class index funds. For that reason I chose to go with Fidelity in which the Spartan Index funds at the lower fee ratios are offered.

I don't think you can put the entire amount of your income in, you have to take into account social security and medicare taxes. Make sure you do the calculations correctly. The formula for solo 401(k) is that there is an employee portion, and an employer portion (20% of net income), but that's a rough guide so make sure you fill in the details.