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Solo 401k

By CL following x   2018 Dec 5, 4:46pm 373 views   19 comments   watch   sfw   quote     share    


Anyone ever do a Solo 401k? What's your favorite brand? Any pros/cons?

(Also, long time- no see!) :)
1   Ceffer   ignore (1)   2018 Dec 5, 5:06pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

https://investor.vanguard.com/small-business-retirement-plans/individual-solo-401k

Not many cons, if you don't have employees outside of spousal unit.
2   CL   ignore (0)   2018 Dec 5, 5:18pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Yep. That's what I was thinking. I've read that Etrade's was good too. I am just somewhat unclear on fees.

I think I'd do just regular contributions to like an S&P ETF or something.

Thanks, BTW.
3   Rin   ignore (3)   2018 Dec 5, 5:23pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

CL says
S&P ETF or something.


IMHO, Dividend Aristocrat ETFs only, as the index trackers alone, may go sideways or down (& then up) for some time.
4   Patrick   ignore (1)   2018 Dec 5, 5:34pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Is a solo 401k the same as an SEP IRA?
5   Evan F.   ignore (0)   2018 Dec 5, 5:51pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
Is a solo 401k the same as an SEP IRA?

Wondering the same thing..
6   Ceffer   ignore (1)   2018 Dec 5, 7:49pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

It looks like contribution limits for employers are better with solo 401k, and 'employee' contributions (wife?) can be higher and done as a Roth.

The killer for many plans are the employees, who legally require contributions according to pretty generous vesting schedules, and this also increases costs of plan administration. It also places a 'contribution' tax on the payroll that can negate the benefits of the plan to the employer. That, and employees seldom recognize or appreciate the contribution, but become a leg of harassment over loans etc. from the plans. again, administration costs and hassle. I have known small business professionals who have foregone the more complex plans for their own retirement for these reasons, and just have personal IRAs. If you have very high turnover of employees, it might still be OK according to cost benefit analysis, since they may not qualify or vest, and a portion of their contribution would revert to the general plan fund i.e. owner and long term employees. Still, plans have administrative costs that may not be practical for small businesses.

For solo business with wife, there is no such disadvantage if you want to make large contributions.
7   Evan F.   ignore (0)   2018 Dec 5, 11:26pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

I have a SEP. Worthwhile for me because I'm Incorporated as a C Corp and have been heavily front loading my retirement as the contribution limit is quite high.
8   Blue   ignore (0)   2018 Dec 6, 1:24am   ↑ like (3)   ↓ dislike (0)   quote   flag        

Patrick says
Is a solo 401k the same as an SEP IRA?

No.

SEP - contribute up to 25% of the salary. (2018 max $55,000)

solo or i401k - has two parts to contribute: (2018 max $55,000 + 6k if you are 50+)
1. Employee Contributions: As an employee, you can defer up to 100% of your compensation, or “earned income” up to $18,000 (plus $6k if you're 50+ = $24k max)
2. Employer Contributions: This is a bit complicated to calculate, its anywhere from 20% to 25% depends on your situation (irs.gov site has a form to do math)
btw, if the account total value goes more than $250k, irs expects to fill certain form(s) periodically and submit to clients I guess.

In either case account has to be opened on or before Dec 31 tax year to contribute and the not everyone qualify for the above two depends on the income limits.
ref:
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions
https://www.irs.gov/retirement-plans/one-participant-401k-plans
9   Blue   ignore (0)   2018 Dec 6, 1:27am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Evan F. says
I have a SEP. Worthwhile for me because I'm Incorporated as a C Corp and have been heavily front loading my retirement as the contribution limit is quite high.

My understanding on SEP is "contribute up to 25% of the salary". Is there any advantage of having a C-Corp, if so how.
10   FortWayneIndiana   ignore (0)   2018 Dec 6, 7:21am   ↑ like (0)   ↓ dislike (0)   quote   flag        

I use Fidelity, self managed.
11   CL   ignore (0)   2018 Dec 6, 8:45am   ↑ like (0)   ↓ dislike (0)   quote   flag        

a href="/post/1320684&offset=#comment-1553374">Blue says
Patrick says
Is a solo 401k the same as an SEP IRA?

No.

SEP - contribute up to 25% of the salary.

solo or i401k - has two parts to contribute:
1. Employee Contributions: As an employee, you can defer up to 100% of your compensation, or “earned income” up to $18,000 (plus $6k if you're 50+ = $24k max)
2. Employer Contributions: This is a bit complicated to calculate, its anywhere from 20% to 25% depends on your situation (irs.gov site has a form to do math)
btw, if the account total value goes more than $250k, irs expects to fill certain form(s) periodically and submit to clients I guess.

In either case account has to be opened on or before Dec 31 tax year to contribute.


Yes, https://www.kiplinger.com/article/retirement/T047-C000-S003-solo-401k-contribution-limits-for-2018.html
You can contribute as the employer too, bringing it to a potential total of $61K. And, as you said, up to 100% of "compensation", so if you have a spouse who does 1099 work as a gig but doesn't make a ton of dough, it seems like you could drop all or most of it into the Solo 401k.

I think you have to create the account by EOY, but can fund it as late as the end of your tax filing (maybe even in this case, October of 2019 if you have filing extensions)

ETrade, it seems to me, charges per transaction (like when you buy or sell the ETFs). But some also have a monthly fee and like an expense ratio? Any additional expounding on the fees part?

The main outfits I checked out, preliminarily were TD Ameritrade, Fidelity, ETrade, Capital One and Vanguard.

Thanks folks!
12   PrivilegedtobeWhite   ignore (1)   2018 Dec 6, 1:17pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I did a bunch of research, and I'm opening up an ETrade solo 401k for my wife. She's a 1099.
13   CL   ignore (0)   2018 Dec 10, 9:21am   ↑ like (0)   ↓ dislike (0)   quote   flag        

PrivilegedtobeWhite says
I did a bunch of research, and I'm opening up an ETrade solo 401k for my wife. She's a 1099.


You're welcome! :)

Any reason you chose them over the competitors?
14   adarmiento   ignore (0)   2018 Dec 10, 8:57pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Yeah, recommend Vanguard for Individual 401k.

The Lifestrategy Growth or Moderate Growth Funds are good picks as far as a fund of index funds.
15   PrivilegedtobeWhite   ignore (1)   2018 Dec 10, 9:01pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

CL says
PrivilegedtobeWhite says
I did a bunch of research, and I'm opening up an ETrade solo 401k for my wife. She's a 1099.


You're welcome! :)

Any reason you chose them over the competitors?
Why am I welcome?

ETrade allows loans against your 401k.
16   MrMagic   ignore (11)   2018 Dec 11, 8:56am   ↑ like (1)   ↓ dislike (0)   quote   flag        

CL says
Anyone ever do a Solo


I do.

But sometimes, it's always a difficult choice which color.

17   CL   ignore (0)   2018 Dec 11, 12:28pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

PrivilegedtobeWhite says
CL says
PrivilegedtobeWhite says
I did a bunch of research, and I'm opening up an ETrade solo 401k for my wife. She's a 1099.


You're welcome! :)

Any reason you chose them over the competitors?
Why am I welcome?

ETrade allows loans against your 401k.


Oh, I thought you did your research as a result of my posting this. What you are saying is that you did a lot of research, and the fruits of that are that you determined ETrade to be the best?

Also, I have seen "loans" as being a decision point for a lot of people, but I don't get what the big deal is? In case of calamity?
18   PrivilegedtobeWhite   ignore (1)   2018 Dec 11, 7:51pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

CL says
Oh, I thought you did your research as a result of my posting this. What you are saying is that you did a lot of research, and the fruits of that are that you determined ETrade to be the best?

Also, I have seen "loans" as being a decision point for a lot of people, but I don't get what the big deal is? In case of calamity?
Ah no. I had done the research anyway. ETrade just seemed to be low cost and flexible with little restrictions. I don't remember all the details. Regarding loans, it's not a big deal but it is an advantage over Vanguard, for example. Why go with another company where you can't get a loan? Never know when you might need the money for a house or hardship or whatever.
19   CL   ignore (0)   2018 Dec 13, 11:30am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Thanks everyone!




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