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Best Solo 401k Plan? Free vs. Paid?


Mephistopheles
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Greetings

 

Does anyone here have their own solo 401k? A few questions:

 

Do you have a free prototype plan with one of the major brokers or did you pay to create a plan with an 401k provider? Which company do you use and recommend?

 

My goal is to have a Roth 401k option, as well as an option to contribute after-tax money beyond the $19,500 limit, and do a mega backdoor Roth conversion. Fidelity doesn't provide a Roth option so its out. I'm looking at TD Ameritrade and E-trade but I can't for the life of me figure out if they allow the after-tax contributions with mega backdoor roth.

 

I can go for one of the online providers like mysolo401k.net, but they charge about $400 set up and annual fee of $100+.

 

Another feature of the paid providers is they can set the plan up to invest in real estate. Is this worth it for me given I plan on investing in real estate in the coming year?

 

Any advice would be appreciated. Thank you  :)

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I can’t  comment on a solo 401k but in my opinion a tax advantages account is NOT the place to invest in private real estate. Long term hold Real estate is a tax efficient asset class as is and there are numerous prohibited transaction rules that make private real estate investment inside an IRA (and also a 401k, I believe) quite cumbersome/ onerous. Others can chime in if they disagree but I’ve looked into it and concluded it wasn’t for me (you can google around for the issues)

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  • 2 weeks later...

I can’t  comment on a solo 401k but in my opinion a tax advantages account is NOT the place to invest in private real estate. Long term hold Real estate is a tax efficient asset class as is and there are numerous prohibited transaction rules that make private real estate investment inside an IRA (and also a 401k, I believe) quite cumbersome/ onerous. Others can chime in if they disagree but I’ve looked into it and concluded it wasn’t for me (you can google around for the issues)

 

Thanks pupil. You're right, better to buy RE with taxable capital given all the tax benefits. Still would be nice to have the optionality though.

 

 

 

Regarding my initial question. I figured out that you can do whatever you want with the free prototype plans, just know to keep good records and file taxes accordingly based on type of contributions, etc. Basically I'd need to be on top of everything from a fund administration and tax filing perspective.

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  • 2 weeks later...

Did you decide what you're going to do?

 

Yea, I just went with the free prototype plan from TD Ameritrade. I opened 3 accounts: Traditional 401k, Roth 401k, and Profit Sharing. I'll maximize the $19,500 for the Roth, and then put up to $37,500 after tax money into the Traditional, with plans to do an immediate mega backdoor rollover into the Roth 401 or a Roth IRA.

 

They don't have any limits and let you do whatever you want, but emphasize that I am responsible for all administrative/accounting. I feel as long as I keep adequate records I will be fine in case of an audit.

 

Hopefully it works out.

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