Solo 401k startup questions

[moonpalace]

My wife is self-employed and we're about to open a solo 401k with Vanguard.

We've got at least $2k/month to put in there. I'd like to automate a base amount every month ($2k or a bit more) and then put in more as we can, up to our max of roughly $33k/year.

First question: does it make sense to wait to make the initial contribution until we've got $10k so we can get into Admiral Shares from the start?

Also, I would love some advice on which fund(s) to put this 401k in. I'm 41, she's 39, and we'll likely continue working another 15 years. Two kids, 7 and 11. I have a 401a at work with $77k in FUSVX (just moved it there after realizing that the target fund I was in had a 1% ER), and contributions to that are $11k a year, for what that's worth. I'd be fine doing a couple of funds in the 401k but I have a general preference for keeping this simple.

Thanks!

[bacchi]

There ain't no Admiral shares in a Vanguard solo 401k.

If you want it simple, go with a couch potato 3 plan or something. What's your IPS (Investor Policy Statement) say? Would you keep contributing if the market takes 30% dip or would you panic and buy bonds or go to cash?

https://www.bogleheads.org/wiki/Three-fund_portfolio#Vanguard_funds

[moonpalace]

Thanks for the response, Bacchi!

There ain't no Admiral shares in a Vanguard solo 401k.

Huh, I must have misread the website on that topic. Seemed like I would have access to any Vanguard fund.

If you want it simple, go with a couch potato 3 plan or something. What's your IPS (Investor Policy Statement) say? Would you keep contributing if the market takes 30% dip or would you panic and buy bonds or go to cash?

I'd happily keep on buying.

Thanks again.

[samickle]

May I ask why the focus remains on Vanguard? Although they were the first mover in the passive investing low-expense space, I think others have since overtaken them. What do you think?

[samickle]

I actually looked into all the options and concluded that he Vanguard Plan offered the least flexibility. At the moment considering using an independent Solo 401k provider https://www.401kcheckbook.com/ provider and then use their document to set up multiple accounts. There are several out there that can provide such a service. The benefits are the flexibility in investment options and plan design, but entails some more responsibility as I'll be the Trustee.

[Proud Foot]

May I ask why the focus remains on Vanguard? Although they were the first mover in the passive investing low-expense space, I think others have since overtaken them. What do you think?

The biggest advantage Vanguard still has is the ownership structure. While others have caught up with them in regards to expenses, how Vanguard is structured makes it far less likely for the expenses to increase whereas other providers could decide the low expense funds are not making enough money for the company and raise the expenses as a result. Vanguard has also reduced the expenses on their funds and ETF's to stay competitive with other providers.

[samickle]

 Thank you, that's important info and puts things in perspective.

[Heroes821]

The only thing I would add is that I was confident in how much I could contribute under employER contributions for 2016 and I got the number wrong when taxes were filed and had to jump through some hoops to fix it.  If you are 100% confident that 33k will be her limit great, otherwise I would put in the personal cap first and then get the business taxes sorted and then contribute the employer portion before you file.  The Vanguard solo 401k Calculator is NOT accurate as they told me over the phone when I was trying to get mine sorted last month.

[moonpalace]

The only thing I would add is that I was confident in how much I could contribute under employER contributions for 2016 and I got the number wrong when taxes were filed and had to jump through some hoops to fix it.  If you are 100% confident that 33k will be her limit great, otherwise I would put in the personal cap first and then get the business taxes sorted and then contribute the employer portion before you file.  The Vanguard solo 401k Calculator is NOT accurate as they told me over the phone when I was trying to get mine sorted last month.

This is exactly what our accountant suggested. I'm doing the $2k/month as employee contributions. Started in March so I'll do that until December to hit the $18k personal cap. Then will circle back with accountant and figure out the employer cap with more certainty.

[fidreamer]

I am also getting ready to open solo 401k with vg, so I am glad you brought this up.  Need to figure out what funds to buy...

[protostache]

My solo 401k is through, interestingly enough, My Solo 401k. The guy who runs it is named Mark Nolan and he has been super helpful with all of the wacky off the wall questions I've thrown at him, mostly about mustachian things.

All of our actual accounts are Investment-Only Plan accounts at Fidelity. We have three: one pre-tax account for my wife, one pre-tax account for me, and one after-tax account for me. I also have a Roth IRA there specifically set up to receive non-Roth after-tax rollover money (mega backdoor Roth).

This setup is pretty flexible. You can buy a number of Fidelity index funds and iShares ETFs for free and if you want to use Vanguard ETFs it's $4.95 per trade, which is honestly pretty reasonable if you're putting in $2,000 per month. Eventually you can use these accounts as checking accounts as well, if you want to do something like invest in real estate or hard money lending when you're at that level.

[Grande]

I was going to post a question about the Vanguard i401k but this thread touches on my question.

I'm reading Vanguard i401k accounts charge $20 a fund per year and Admiral Shares ($10,000+ with lower expense ratios) are not available. Is this correct? I was considering transferring my wife's Schwab individual 401k fund over to Vanguard but it seems Schwab is the clear winner here. No annual fees. Schwab's SP500 and Total Market index funds have expense ratios of 0.03%. That's far less than Vanguard with expense ratios of 0.14% and 0.15% respectively.

What am I missing?

[Heckler]

. Schwab's SP500 and Total Market index funds have expense ratios of 0.03%. That's far less than Vanguard with expense ratios of 0.14% and 0.15% respectively.

What am I missing?

Whats with all the mis information?  VTSAX ER is 0.04.

https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT

[Grande]

. Schwab's SP500 and Total Market index funds have expense ratios of 0.03%. That's far less than Vanguard with expense ratios of 0.14% and 0.15% respectively.

What am I missing?

Whats with all the mis information?  VTSAX ER is 0.04.

https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT

The 'mis information' is not coming from me. It's likely from you misreading. One cannot invest in Admiral shares in a Vanguard i401k account as far as I can tell. So VTSAX at the 0.04% expense ratio is not available. One apparently needs to use Investor Shares (VTSMX) instead.

https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT

0.15%. Just like I wrote.

[BlueHouse]

Solo?  Or small-plan?  May make a difference in the funds available

Are institutional shares available if admiral are not?  This is what I was offered through another administrator.

[DavidAnnArbor]

Because admiral was not available with the Vanguard Solo 401K,  I chose to open my solo 401K with Fidelity instead, and I simply invest in their total stock market, and total international index funds.

[HAPPYINAZ]

Because admiral was not available with the Vanguard Solo 401K,  I chose to open my solo 401K with Fidelity instead, and I simply invest in their total stock market, and total international index funds.

Do you have to mail a check when you make a deposit to the account?  I saw some comments on the fidelity site about how annoying that was for their solo 401k....but Fidelity said they were looking into going electronic for that.  How does it work for you currently?

[DavidAnnArbor]

I have Fidelity electronically withdraw money from my banking account. The money is moved over to Fidelity's cash management account. Then the money electronically moves over from the Cash Management account to the Solo 401k (Keogh Profit sharing )  account.
No check needed.