How to Setup individual 401k

[jaerco]

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

 

[grumpy]

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?

Grumpy

 

[eridanus]

Vanguard offers a SEP but no solo-401k, last I looked. Fidelity and Schwab have solo-401ks.

 

[brewer12345]

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.

 

[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?

 

[brewer12345]

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.

 

[Vincenzo Corleone]

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.

 

[Targeting40]

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.

 

[Oliver]

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/ira/index.cfm?story=taxfree

 

[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.

 

[Martha]

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.

 

[jaerco]

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.

jaerco