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How to Setup individual 401k
Old 01-30-2006, 11:36 AM   #1
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How to Setup individual 401k

Anyone know any sites for help setting up a SEP/ROTH 401(k)/UNI-K? I am an independent contractor. I am switching from ML to Vanguard and need to find the paper work to set up the tax forms/etc. Currently I have a UNI-K that is set up through Pioneer Investments and I need to switch. I am trying to coordinate rolling over my current pretax accounts to Vanguard and setting up other posttax accounts as well. Thanks in advance if anyone knows anywhere to start.
jaerco
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Re: How to Setup individual 401k
Old 01-30-2006, 11:44 AM   #2
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Re: How to Setup individual 401k

A quick search of the Vanguard web site did not turn up anything on individual 401(k). I believe there are only a few other firms besides Pioneer that offer Uni-k type accounts. Have you tried a Google search?

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Re: How to Setup individual 401k
Old 01-30-2006, 12:12 PM   #3
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Re: How to Setup individual 401k

Vanguard offers a SEP but no solo-401k, last I looked. Fidelity and Schwab have solo-401ks.
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Re: How to Setup individual 401k
Old 01-30-2006, 12:22 PM   #4
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Re: How to Setup individual 401k

We set one up about 18 months ago for my wife's business. Ended up going with Fidelity and they made it pretty painless (and no fees). Might be worth calling them.
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Re: How to Setup individual 401k
Old 01-30-2006, 01:10 PM   #5
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Re: How to Setup individual 401k

Does anyone know if there are any real advantages to the SEP or individual 401k or KEOGH? I plan to max them out and not touch them except every couple of years or so to rebalance. I don't need loans etc from the accounts. Then I am going to look into taking the SEPP that I have read about on here to "pre-retire" in about 10-12 years. Can you take the SEPP from the SEP?
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Re: How to Setup individual 401k
Old 01-30-2006, 01:19 PM   #6
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Re: How to Setup individual 401k

Quote:
Originally Posted by jaerco
Does anyone know if there are any real advantages to the SEP or individual 401k or KEOGH?* I plan to max them out and not touch them except every couple of years or so to rebalance.* I don't need loans etc from the accounts.* Then I am going to look into taking the SEPP that I have read about on here to "pre-retire" in about 10-12 years.* Can you take the SEPP from the SEP?
Last I looked, it appears that you can put the most away in the solo 401k. As a practical matter, you could pretty easily close any of these types of accounts and roll the money to an IRA to do SEPPs if you want to, so I wouldn't let that drive your decision.
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Re: How to Setup individual 401k
Old 01-30-2006, 07:45 PM   #7
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Re: How to Setup individual 401k

I have my Individual 401K with T. Rowe Price. You might want to check them out as well. Setup was painless and I don't recall there being any fees. Not sure how they compare with the other(s) mentioned.
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Re: How to Setup individual 401k
Old 01-30-2006, 08:13 PM   #8
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Re: How to Setup individual 401k

Solo 401K's rule in terms of maximum contributions.* The limit is over $40K per year.* We use Fidelity for our solo 401K's and have been very satisified.
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Re: How to Setup individual 401k
Old 01-30-2006, 11:47 PM   #9
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Re: How to Setup individual 401k

TDW is also free for solo 401k. However, TDW and Ameritrade have merged and will be consolidating operations over the next year.

I think there is an outfit that you can pay and invest in Vanguard funds. (EDIT - One outfit is http://401kbrokers.com. They charge .25% of assets) It might be okay IF they gave you access to the lower cost institutional shares. However, I would consider using Vipers to access Vanguard funds. (Most of my solo 401k is invested in the commodity fund PCRIX not ETF/VIPERS)

Oliver

PS Here is a link to a basic plan comparison http://www.smartmoney.com/retirement...?story=taxfree
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Re: How to Setup individual 401k
Old 01-31-2006, 10:43 AM   #10
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Re: How to Setup individual 401k

I am a bit confused. I am an independent contractor and max out my pretax contributions, this year it will be 44,000. Can't I do that with a SEP or solo 401k? The paper work for the SEP seems pretty simple.
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Re: How to Setup individual 401k
Old 01-31-2006, 11:53 AM   #11
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Re: How to Setup individual 401k

Quote:
Originally Posted by jaerco
I am a bit confused. I am an independent contractor and max out my pretax contributions, this year it will be 44,000. Can't I do that with a SEP or solo 401k? The paper work for the SEP seems pretty simple.
SEP IRA limits:
A SEP IRA owner may contribute up to 25% of compensation, as much as $42,000 for 2005 ($44,000 for 2006). However, the maximum compensation upon which SEP contributions can be based is $210,000 (220,000 for 2006). The term "compensation" for self-employed individuals refers to earned income.

Solo401k limits:
You can contribute up to $14,000 for 2005 and $15,000 for 2006 through salary deferral, although this may not exceed 100% of pay. The employer profit sharing contribution limit is up to 25% of pay. There is a total contribution limit, from both sources, of $42,000 in 2005, but only income up to $210,000 can be considered for 2005 and 220,000 for 2006.

However, under a “catch up” provision, individuals age 50+ may contribute an additional $4,000 in salary deferrals beyond the $14,000 in 2005 and $5000 in excess of $15,000 in 2006, allowing for a total contribution limit of $46,000 in 2005 and $49,000 for 2006.

(If I recall correctly, the 25% figure for the 410k and SEP plans may be actually 20% if a solo proprietorship, but the total maximum dollar amounts are the same.)

An example for 2006:

100,000 income age 45, solo401k option
15,000 in personal contributions
25,000 in "employer" contributions (25% of 100,000)
Total in 401k is 35,000.

100,000 income age 45, maximum SEP IRA option
25% income, or 25,000 total in SEP

If you use the 20% of income figure, this example still favors the solo 401k.

Also, there is no catch up provisions if you are over 50 for the SEP.

Edit: This is over simplified, read IRS publication 560 from the www.irs.gov website for more info.
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Re: How to Setup individual 401k
Old 01-31-2006, 12:18 PM   #12
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Re: How to Setup individual 401k

Martha,

Thanks for the input. I think I am getting it figured out. I found form 5305-SEP on the IRS.gov website which needs to be filled out. I think I just need this form at my house, signed by me and then I can set up the SEP with Vanguard or other place. It appears pretty simple now, but I hope I am not missing anything.

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