Author Topic: Solo401k - Higher fees or a Midcap/small cap fund?  (Read 874 times)

BlueDove

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Solo401k - Higher fees or a Midcap/small cap fund?
« on: November 14, 2017, 09:31:23 PM »
Hello fellow Mustachians,

What would you do?

I started my own business this year and I've decided to open a solo 401(k) and I want to do it before December 31 as my employees are in a savings account at the moment and I want to get their asses to work.  So, trying to make a decision.

Finding low-expense-ratio mutual funds is not easy in the solo 401k world! 

So would you:

go with Vanguard, which doesn't allow the less expensive Admiral Shares in its Solo 401k, nor ETFs, so I'm looking at VTSMX with an expense ratio of 0.15%,  Otherwise no fees (there is a $20 per fund fee, but that's waived for me because I have other money with Vanguard)

Or

go with Etrade, which has one fund available with no fees and a 0.07% expense ratio - Fidelity Extended Market Index Premium - FSEVX - which is supposed to correspond to the total return of stocks of mid to small cap U.S. companies.  No other fees. 

https://www.etrade.wallst.com/v1/stocks/snapshot/snapshot.asp?symbol=FSEVX

Etrade has some other nice features that Vanguard doesn't in their Solo 401k, including the option for loans, and in service distributions which allows for the mega backdoor Roth option. 

https://www.madfientist.com/after-tax-contributions/

I have about $450K in other tax-deferred accounts, $150K mortgage.  I am 48, single and about 7 years from FIRE. 

I considered Schwab and Fidelity, but they don't have a Roth option.  I also considered TD Ameritrade and the lowest expense ratio on a broad stock mutual fund was 0.16%.

What would you do? 




DavidAnnArbor

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Re: Solo401k - Higher fees or a Midcap/small cap fund?
« Reply #1 on: November 15, 2017, 06:42:58 PM »
Have you specifically asked if etrade allows you to make after tax contributions to the individual 401k plan ?

Bojack

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Re: Solo401k - Higher fees or a Midcap/small cap fund?
« Reply #2 on: November 15, 2017, 07:26:49 PM »
Have you specifically asked if etrade allows you to make after tax contributions to the individual 401k plan ?

No "free" solo(k) provider I'm aware of provides after-tax (nonRoth) contributions. You would have to hire a company to write the document for you. Read the replies in this article and you will find some reasonable providers. https://thefinancebuff.com/after-tax-contributions-in-solo-401k.html

Indexer

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Re: Solo401k - Higher fees or a Midcap/small cap fund?
« Reply #3 on: November 16, 2017, 06:21:14 AM »
The Fidelity Extended is low cost, about the same as Vanguard's Extended Admiral. However, that fund is not a good representation of the total market. By market cap it represents the bottom 30% of stocks, and those tend to be the most volatile stocks.

Does Etrade also have a 500 index available? 70% 500 index + 30% extended market index = total stock market index.