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A 401(k) is a retirement plan offered by an employer, typically to employees that are older than 18. It’s designed so the employee can set aside money for their future and decide when they retire. The value of these plans has risen in recent years with higher fees often being charged on investment options, making it harder for people to save enough money over time. Solo 401(k)s provide more flexibility and lower fees at both the individual and company level; you’ll get cheaper investments without sacrificing your tax benefits or anything else like that.
Small business owners may save up to $58,000 per year for retirement via tax-free salary deferrals and employer contributions with a Solo 401(k) plan. Choosing the appropriate provider is crucial to utilizing a Solo 401(k) effectively (k). Solo 401(k) programs are fairly comparable to standard 401(k) plans in terms of regulation. Those that use Solo 401(k)s, on the other hand, will have distinct investment goals and objectives and will need to choose a provider differently from those who use other plans.
We compared the prices, investment possibilities, customer service, and other characteristics of several Solo 401(k) plans. The six best Solo 401(k) providers are listed below.
Vanguard
Why We Like Vanguard:
Vanguard is a well-known corporation that provides low-cost investment options to its clients. Vanguard, the world’s biggest mutual fund business, offers simple, basic programs with access to professionally managed funds. For Solo 401(k) plans, Vanguard offers substantial expense reductions.
Vanguard does not actively manage Solo 401(k) programs; instead, it provides members with the information required for the company and personal tax filing.
Costs
Vanguard’s Solo 401(k) fees are extremely basic. There are no account maintenance or trading fees, which is a significant benefit. For each fund utilized in a solo 401(k) plan, the expense is just $20 per year. Account-holders with at least $50,000 in Vanguard accounts may avoid these costs.
ShareBuilder 401k
Why We Like ShareBuilder 401k:
ShareBuilder 401k’s mission is to make 401(k) plans accessible to everyone, especially small firms with one or two employees. ShareBuilder 401k provides low-cost programs that may be set up and managed entirely online. They include investment choices such as index exchange-traded funds (ETFs) and model portfolios that are chosen by an investing committee comprised of industry experts.
ShareBuilder 401k will actively administrate and handle all record-keeping and reporting for your Solo 401(k) plan, relieving the company owner of this responsibility and offering further peace of mind.
Costs
ShareBuilder 401k’s solo 401(k) plans offer fixed fees that vary depending on the number of owners in your company. Setup costs start at $150, with monthly administration fees of $25. Investment-specific fees, which average.75 percent yearly, are also withdrawn automatically from your account.
TD Ameritrade
Why We Like TD Ameritrade:
TD Ameritrade provides investors with a wide range of investment alternatives at little or no cost. Its Solo 401(k) plan lets you invest in mutual funds, exchange-traded funds, bond funds, and managed portfolios.
One disadvantage of TD Ameritrade is that, like Vanguard, you are responsible for all IRS reporting. TD Ameritrade will provide you with the information you need, but it isn’t an active administrator. It’s also worth noting that, although TD Ameritrade will ultimately merge with Charles Schwab, it will continue to operate separately until the merger is completed.
Costs
The plan itself has no setup or yearly fees with TD Ameritrade’s solo 401(k) plans. Individual fund sales may incur transaction fees, depending on how long they’ve been held or if you opt to have a robo-advisor handle your portfolio for you. The great majority of stock and ETF transactions, on the other hand, will be free of charge.
Charles Schwab
Why We Like Charles Schwab:
Charles Schwab provides a Solo 401(k) for small company owners that want extra brokerage or banking services. Charles Schwab provides a broad range of services to its consumers, including financial advice, consumer banking, and a variety of loan choices.
Charles Schwab does not provide an active administration service and, like many bigger investing businesses, simply delivers tax information to members once a year.
Costs
Charles Schwab does not charge account holders monthly or yearly fees, instead of charging commissions depending on the kind of transaction. Domestic equities, mutual fund transactions, and Charles Schwab’s own ETFs have no trading commissions. Contract options, bond trades, and international stock transactions, on the other hand, have charges. Other services, such as business banking and lending, may incur additional charges.
Rocket Dollar; best alternative investment option
Why We Like Rocket Dollar:
Rocket Dollar provides checkbook control to investors, allowing you to invest your Solo 401(k) contributions in whatever investment vehicle you like. Someone with a greater risk tolerance may invest in bitcoin, real estate, peer-to-peer lending, or precious metals as a result of this. Stocks, bonds, and exchange-traded funds (ETFs) are also available with Rocket Dollar. Rocket Dollar will actively manage your Solo 401(k) account.
Costs
Rocket Dollar charges a one-time startup fee as well as monthly fees for managing your Solo 401(k) (k). The base-level setup charge is $360, plus a $15 per month administrative fee. At an extra expense, a gold tier is offered, which will provide more robust administration and additional perks for investors.
E-Trade; Best option for active traders
Why We Like E-Trade:
A Solo 401(k) from E-Trade is a wonderful alternative for small company owners who perform a lot of individual stock and bond trading in their accounts. E-Trade provides a comprehensive selection of stocks, bonds, mutual funds, and exchange-traded funds (ETFs). E-Trade also provides limited banking services, such as borrowing against a retirement account.
Setup and administrative costs are not charged by E-Trade. However, it will only offer specifics of information for tax filing, leaving reporting to the account owner.
Costs
Pricing is relatively competitive when compared to other suppliers. Trading isn’t free, however, and expenses may soon build up for account users who trade too often. Although day trading is not encouraged in retirement accounts such as Solo 401(k) plans, E-Trade offers it to individuals who desire it.
Alternatives to a Self-Directed 401(k) (k)
Whether you’re not sure if a Solo 401(k) is suited for you, another form of retirement benefits account could be a better option. Traditional Individual Retirement Accounts (IRAs) and simplified employee pension individual retirement accounts (SEP-IRAs) both provide tax advantages and, as IRAs, eliminate the administrative expenditures associated with certain 401(k) programs.
SEP-IRAs
SEP-IRAs are a wonderful option for self-employed people and small company owners who wish to contribute up to 25% of their salary, or $58,000, without having to manage a 401(k) (k). If you earn more than $75,000 per year and don’t expect to recruit any workers in the future, SEP-IRAs are a better alternative than Solo 401(k) plans.
Traditional IRAs
Traditional IRAs are the simplest and simple to set up of all the retirement plans. Traditional IRA contribution limitations are $6,000 per year for those under 50 and $7,000 for those over 50, unlike a Solo 401(k) or a SEP-IRA. Traditional IRAs are excellent choices for small company owners that can only set down a few thousand dollars each year for retirement. Consider a Roth IRA if you wish to make after-tax contributions.
Conclusion
Once you’ve chosen a Solo 401(k) plan, you’ll need to think about a few things to figure out which provider is ideal for you. Cost, investment possibilities, and extra services are among these considerations. The product offers of most Solo 401(k) plans are relatively similar. However, there are certain service and cost variances to consider.
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Frequently Asked Questions
What is the maximum Solo 401k contribution for 2021?
The maximum contribution for the 2019 tax year is $19,000. For 2020 it will be indexed to inflation and for 2021 the limit remains unchanged at $19,000.
Do banks offer Solo 401k?
Banks don’t offer Solo 401k. It is not a bank-sponsored retirement plan and the investment risk associated with it is too great to be offered by traditional banking institutions
Which company has the best 401k match?
Mutual funds are an asset that is owned by a fund company, and they have the right to update their investment holdings at any time. Some of these companies include Vanguard, Fidelity Investments, and T. Rowe Price Group.
