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Looking for Self-Employed 401k that allows me to buy CDs
02-28-2016, 11:33 AM
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#1
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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Looking for Self-Employed 401k that allows me to buy CDs
Vanguard holds my 401k and both the volatility and yields on its fixed income investments concern me. I'm looking for a 401k where I can hold CDs from virtually any bank, so I assume that is a self-directed 401k. However, I'm not seeing where those are available from well-known providers.
The account has about $1.5MM and I'm using it for the fixed income portion of my allocation so a safe 1% yield right now on short-term cash/CD fits what I'm looking for.
Anyone know of any self-directed 401k providers that would offer this flexibility?
Thx.
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02-28-2016, 11:47 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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It's not exactly what you are looking for, but you could always buy brokered CDs (issued by any bank--at least if you can find a seller) and keep them in your VGD brokerage account inside your solo 401K. The principal and interest in brokered CDs is as safe as one bought directly from a bank. The downside is if interest rates climb, you can't just withdraw your money early and forfeit some interest, you need to find a buyer and that can be expensive.
Maybe someone else has a better idea.
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02-28-2016, 12:02 PM
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#3
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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Vanguard doesn't allow me to purchase brokered CDs in my 401k account account. Funds are the only allowable investment option so it is either almost no yield in a money market or price volatility (albeit possibly small) in a fixed-income fund.
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02-28-2016, 12:10 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by RoyDornoch
Vanguard doesn't allow me to purchase brokered CDs in my 401k account account.
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Thanks, I didn't know that. I have a Fidelity Solo 401K, and they allow ownership of ETFs and CDs inside the Solo 401K. So, that could be an option for you.
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02-28-2016, 12:53 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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I have a TDAmeritrade solo 401(k). I have not bought CDs in it, but I presume it is allowed as I have bought CDs in my IRA at TDAmeritrade.
The CDs purchased are not "from any bank", but are from an always-changing list of CDs available for purchase through the fixed income (bonds & CDs) order page. These CDs are usually the same ones available through many brokerages such as Fidelity and Vanguard.
So if you have ever bought a CD from an online brokerage, then you know the deal.
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02-28-2016, 12:53 PM
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#6
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,358
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When I had a solo 401(k) with Fidelity I could buy whatever I liked. Had it for years and was very happy with it.
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02-28-2016, 12:58 PM
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#7
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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Thanks for the feeback. I've also got Fidelity and non-401k Vanguard accounts and those do allow the purchase of brokered CDs so I am familiar with the drill. However, my experience has been that the brokered CDs pay significant less than the online FDIC-insured banks and, as indicated earlier, the Vanguard self-employed 401k only allows the purchase of Vanguard funds.
I'm very happy with Vanguard but would be happier right now with a 1% FDIC-insured CD or online saving account (from GE Capital, Ally Bank, etc.) than either the fixed income or equity funds that Vanguard offers. My Vanguard 401k is mostly the ultra-short bond funds and the short-term investment grade bond fund so there isn't a great deal of potential volatility.
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02-28-2016, 01:09 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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When the market is open tomorrow, I'll take a look at CD/bond rates available. What kind of maturities are you looking for? 1-yr? 3-y? I vaguely recall GE Capital, Ally, GoldmanSachs all having new issue CDs available routinely through TDAmeritrade.
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02-28-2016, 01:16 PM
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#9
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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Thanks, LOL! One to two year maturities are my target.
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02-28-2016, 01:50 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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Does your 401k allow rollovers to an IRA? That's how I moved funds from my 401k to IRA-CD accounts at my credit union.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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02-28-2016, 01:56 PM
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#11
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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yes, I believe that it does but I plan on working for another 2.5 years so would like to keep my 401k in place so that I can continue to deduct $59k each year.
I suppose that I could do a partial rollover to an IRA to facilitate additional self direction.
The accounts that I've looked at are described as self-directed 401ks with checkbook authority but the many who advertise as potential custodians of this type of account are not household names. I suppose that the Vanguard and Fidelity mega-firms don't see much profit in handling this type of account.
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02-28-2016, 02:04 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Roy,
I noticed from a previous post that you are 54 this year and plan to retire. I'm about the same, and had plans to terminate my employment and take withdrawals from my solo 401K penalty-free under the "terminated at age 55 or after" rule. That kinda got derailed for a couple of reasons, primarily because it appears that when you "terminate your employment" as the owner of a solo 401K, then (since you are the only employee), the plan is also terminated--so there;s no plan from which to make the withdrawals starting at age 55. Of course they can be rolled into an IRA, but there's no "age 55" rule for IRAs. so I'd need to wait until age 59.5 to get unfettered access without paying a penalty. Of course 72T SEPP withdrawals are allowed anytime, but the annual limits on those won't be quite what I'd hoped to get.
Anyway, I never found >definitive< guidance on any of this, but that was the takeaway from reading at Fairmark and some helpful comments on this board. If you are in the same boat (you could always wait another year to be 55 before ending your business) and find out something different, let us know. FWIW.
Note: Somebody needs to start a pro-forma company that has a 401K that allows withdrawals at age 55, and all they do is "hire" folks for a day and let them roll some of their solo 401K money in--then they can "retire" and get the money out without penalty. I'd be okay with giving them 5% in order to avoid a 10% IRS penalty. Arbitrary rules deserve an arbitrary work-around.
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02-28-2016, 02:15 PM
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#13
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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thanks for the response, samclem - the post that you reference must have been three years old because I'm 57 now (and planning to retire the day prior to my 60th birthday).
I've pushed my retirement date back a couple of times as a result of both market dips, not wanting to walk away from a low-stress paycheck, and not feeling comfortable that I won't be bored without going to the office. We have a child who gets out of college shortly before I'm 60 so that is now my retirement date.
So, were financially independent and just aren't mentally ready to pull the trigger quite yet.
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02-28-2016, 05:50 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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Quote:
Originally Posted by RoyDornoch
yes, I believe that it does but I plan on working for another 2.5 years so would like to keep my 401k in place so that I can continue to deduct $59k each year.
I suppose that I could do a partial rollover to an IRA to facilitate additional self direction.
The accounts that I've looked at are described as self-directed 401ks with checkbook authority but the many who advertise as potential custodians of this type of account are not household names. I suppose that the Vanguard and Fidelity mega-firms don't see much profit in handling this type of account.
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I think you should look into the partial rollover. You can keep the 401k active. That's what I have done many times. I do partial rollovers to a Fido IRA to buy individual stocks and several others to purchase credit union CDs. Technically these are direct transfers, not rollovers. I believe any 401k will will charge fees to maintain the account whereas the IRA is just an account designation if you're just looking to buy CDs.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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02-28-2016, 06:12 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: W Wash
Posts: 1,644
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Quote:
Originally Posted by braumeister
When I had a solo 401(k) with Fidelity I could buy whatever I liked. Had it for years and was very happy with it.
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+1
Likewise for my solo 401k with Fido. Had accounts for both self and wife who worked in Biz. If Fido sold it, you could buy it in the 401k's
Be steve
Sent from my iPhone using Early Retirement Forum
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02-29-2016, 07:41 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Quote:
Originally Posted by RoyDornoch
Thanks, LOL! One to two year maturities are my target.
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TDAmeritrade is showing 1 year CDs with best YTM of 0.75%. 3-year CDs at about 1.3% and 1.2% from GoldmanSach and WellsFargo. Here are the "featured" 2-year CDs:
Generally, all brokers will have the same set or similar of CDs in my experience.
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02-29-2016, 08:27 AM
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#17
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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thanks for the info.
For some reason, neither bank CDs or brokered CDs are paying as much as the FDIC-insured online saving accounts (that are positioned to increase yield as rates rise).
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02-29-2016, 05:15 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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Quote:
Originally Posted by RoyDornoch
thanks for the info.
For some reason, neither bank CDs or brokered CDs are paying as much as the FDIC-insured online saving accounts (that are positioned to increase yield as rates rise).
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Have you seen this thread?
http://www.early-retirement.org/foru...als-80499.html
The shorter term FDIC CD deals come and go very quickly. There was one @ 1.5% for 24 months that was due to expire today at www.reverebank.com
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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03-02-2016, 09:26 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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Quote:
Originally Posted by jazz4cash
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The CD Special at Revere Bank has been extended to 3/18.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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03-02-2016, 09:41 AM
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#20
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Dryer sheet aficionado
Join Date: Nov 2009
Posts: 30
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I had not seen the shorter term CD thread, thank you.
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