Sweeping funds from Solo 401K to an IRA

[samclem]

I'm self employed now and have been stashing funds into a solo 401K (to reduce my taxes each year). The account is with Fidelity (in a brokerage acct) with money roughly split between one Fidleity MF and one Vanguard MF. It has worked out well.

All my other investestments are with Vanguard. Vanguard doesn't offer solo 401Ks.

The expenses are low, so I'm not paying a $$ price for present setup. Still, it would be helpful to be able to transfer most of the funds to a conventional IRA at Vanguard every few years. Ths would have several advantages:
-- I'd have more funds under management at Vanguard.
-- There are additional IRS reporting requirements (Form 5500) when a solo 401K exceeds $100K in assets. If I could periodically transfer the funds before they reach this level, I could avoid this hassle.

When you have a regular employer, you pretty much have to leave your job in order to transfer funds from a 401k to your IRA. But as a self-employed person, it would seem there might be a way to terminate the 401K plan (fire myself?), transfer the 40K funds to an IRA, then start up the plan again when I'm re-hired the next day. Also, don't some employers allow 401K transfers to IRAs without termination of employment? Heck, I'm an enlightened employer, I would certainly allow my employee (me) to transfer these funds!

Ideas welcomed.

[FinanceDude]

Originally Posted by samclem

I'm self employed now and have been stashing funds into a solo 401K (to reduce my taxes each year). The account is with Fidelity (in a brokerage acct) with money roughly split between one Fidleity MF and one Vanguard MF. It has worked out well.

All my other investestments are with Vanguard. Vanguard doesn't offer solo 401Ks.

The expenses are low, so I'm not paying a $$ price for present setup. Still, it would be helpful to be able to transfer most of the funds to a conventional IRA at Vanguard every few years. Ths would have several advantages:
-- I'd have more funds under management at Vanguard.
-- There are additional IRS reporting requirements (Form 5500) when a solo 401K exceeds $100K in assets. If I could periodically transfer the funds before they reach this level, I could avoid this hassle.

When you have a regular employer, you pretty much have to leave your job in order to transfer funds from a 401k to your IRA. But as a self-employed person, it would seem there might be a way to terminate the 401K plan (fire myself?), transfer the 40K funds to an IRA, then start up the plan again when I'm re-hired the next day. Also, don't some employers allow 401K transfers to IRAs without termination of employment? Heck, I'm an enlightened employer, I would certainly allow my employee (me) to transfer these funds!

Ideas welcomed.

Take a look at the plan document you signed. It should allow non-hardship transfers when you want. There's an IRS provision for that in the code. If it doesn't have it, see if the custodian can get it amended to your plan.