Author Topic: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs  (Read 5216 times)

dandarc

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Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« on: June 03, 2015, 04:17:12 PM »
So was on the phone with Vanguard regarding transferring an existing Solo 401K from E-Trade.  One big downside of the Vanguard Individual K is that you can only have investor shares in it.  So I'd probably put it all into Life-Strategy Growth and call it a day - no money to be saved by breaking out the funds as Admiral Shares are not available.

So that would be an ER of .17%.

At E-Trade, I could switch what I'm doing now to a 3 fund portfolio with Vanguard ETFs, and achieve a similar portfolio - I think at lower cost (a much lower cost in terms of paperwork)?

So the ER at my weightings would be .0765% (55/25/20 in the big 3).  Call it .09% with the Bid-Ask spread factored in But I'd have to pay comissions on purchases.  I purchase $2000 in a low-month (at the beginning of the year, much more to cover the 18K employee contribution).  ETF purchases at E-Trade are 9.99.  So $30 to buy all 3 every month would be 1.5% or less, to save ~.08% on fees annually.  That doesn't look so good - about an 18 year breakeven.  But if I had a policy of buying a minimum of $2K per fund each month, that caps the "load" at 0.5% or so about a 6 year breakeven.  With sufficient assets (already have 100K in this account), I don't think I'd get too far off from my target allocation with this policy.

Leaning towards staying with E-Trade on this.  What do you think?

bacchi

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #1 on: June 03, 2015, 04:33:25 PM »
Why not buy the Vanguard ETFs in your Vanguard 401k? No commissions, too.

dandarc

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #2 on: June 03, 2015, 04:38:31 PM »
Why not buy the Vanguard ETFs in your Vanguard 401k? No commissions, too.
The Vanguard Solo 401K only allows mutual funds - and only investor shares.  Actually - looks like VTI and BND are available at TD Ameritrade commission free, so it might make sense to move the SoloK over there.  Same 9.99 fee if these funds ever leave the comission free schedule.

milesdividendmd

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #3 on: June 03, 2015, 04:46:35 PM »
TD Ameritrade is worth checking out for fee free ETFs as well, (As is schwab.)

dandarc

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #4 on: June 03, 2015, 05:16:15 PM »
TD Ameritrade is worth checking out for fee free ETFs as well, (As is schwab.)
Yeah - ETrades commission-free ETFs SUCK, although the NTF mutual fund list is better there.  Which brings up another point - I've got 9 funds across 2 accounts at E-Trade that make up my Solo 401K.  Early redemption fee would apply on 4 of those, so that's $200 potentially out the door to liquidate the position.  But the TD Ameritrade guy said they're running a promotion, so $300 would be added to my account over there, so I guess I still come out ahead on the transfer.

YoungInvestor

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #5 on: June 03, 2015, 05:57:51 PM »
So was on the phone with Vanguard regarding transferring an existing Solo 401K from E-Trade.  One big downside of the Vanguard Individual K is that you can only have investor shares in it.  So I'd probably put it all into Life-Strategy Growth and call it a day - no money to be saved by breaking out the funds as Admiral Shares are not available.

So that would be an ER of .17%.

At E-Trade, I could switch what I'm doing now to a 3 fund portfolio with Vanguard ETFs, and achieve a similar portfolio - I think at lower cost (a much lower cost in terms of paperwork)?

So the ER at my weightings would be .0765% (55/25/20 in the big 3).  Call it .09% with the Bid-Ask spread factored in But I'd have to pay comissions on purchases.  I purchase $2000 in a low-month (at the beginning of the year, much more to cover the 18K employee contribution).  ETF purchases at E-Trade are 9.99.  So $30 to buy all 3 every month would be 1.5% or less, to save ~.08% on fees annually.  That doesn't look so good - about an 18 year breakeven.  But if I had a policy of buying a minimum of $2K per fund each month, that caps the "load" at 0.5% or so about a 6 year breakeven.  With sufficient assets (already have 100K in this account), I don't think I'd get too far off from my target allocation with this policy.

Leaning towards staying with E-Trade on this.  What do you think?

Why don't you buy only one ETF every month? Month 1 = 2000$ fund 1 , Month 2 = 1600$ fund 3 , Month 3 = 2400$ fund 1 , month 4 = 2000$ fund 2?

You'd cut your fees by 67% with minimal disruption to your chosen AA.

forummm

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #6 on: June 03, 2015, 09:58:45 PM »
The Vanguard investor shares ERs aren't so bad. And the Target funds are fine as you mention too. Just roll it over into an IRA at some point and you don't need to worry about the ERs anymore.

milesdividendmd

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #7 on: June 03, 2015, 10:17:42 PM »
Vanguard is great, but there is no shame in using other brokerages.

A vanguard Etf purchased fee free through TD ameritrade is superior to an investor class mutual fund purchased through vanguard for the same reason that Vanguard funds are generally better than most other issuers' funds. It is cheaper.

There is no mystical power to vanguard other than the magic of low fees.

DavidAnnArbor

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #8 on: June 05, 2015, 09:02:31 PM »
One big downside of the Vanguard Individual K is that you can only have investor shares in it... What do you think?

I was also disappointed by this fact, and that's why I chose to go with Fidelity for my Solo 401(k) plan so that I could invest in a Fidelity Advantage class Total Stock Market Index fund with a lower expense ratio than the Vanguard Investor class Total Stock Market Index fund.

forummm

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #9 on: June 05, 2015, 09:22:17 PM »
The Vanguard investor shares ERs aren't so bad. And the Target funds are fine as you mention too. Just roll it over into an IRA at some point and you don't need to worry about the ERs anymore.

Is there a limit on how often you can rollover a solo 401k? Could you just roll it over every year into an IRA and then invest in whatever you want?

DavidAnnArbor

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Re: Vanguard Solo401K vs. E-Trade w/ Vanguard ETFs
« Reply #10 on: June 05, 2015, 09:56:50 PM »
So if you had a solo 401(k) with Vanguard, you could ask Vanguard, how often you can do a rollover into your Vanguard traditional IRA.