Solo 401k intermediate suggestions?

Question

I need to open one up before the end year. A quick search yielded me mysolo401k.com. They charge 425 to start up an account, and 125 a year for maintenance. I will probably start doing the maximal 57k contribution for this year, and every qualifying year after. So, i would rather it be a flat fee. I want to be able to loan the money to other investors, so i don't want to setup up through companies like fidelity where you can only invest in other fidelity funds.

Any suggestions on how much i should be paying or other suggestions?

Sean H. · Answer

Yes. Not to blood, at a set interest rate, no profit sharing, no physical involvement in the investment or mixing of non-retirement money. I think that's about it.

I just don't know the documents to use for dispersing the money though, but i think that's what a plan provider is doing, correct?

Todd Goedeke · Answer

@Sean H., interview at least 3 providers to see how they will provide support, including loan documents, for investments made. Do you know all the do’s and don’t s of loaning to a 3 rd party inside a Solo 401k?

Sean H. · Answer

If i want to loan another investor a certain amount of money, at a set interest rate. I don't see how the process will be that convoluted? As long as my tax accountant is writing off the loan at the end of the year, i would rather save the money a setup a plan on a site. Unless, having a tax professional involved throughout the process has a comparable fee for their services (but i'm guessing its exponentially more).

Brian Eastman · Answer

@Sean H.

A self-directed Solo 401k is not "an account", it is a self-administered qualified retirement plan.

When it comes to establishing such a plan, you can get a set of documents and a wish of good luck, or you can engage professionals to assist you with administering your plan and adhering to the IRS guidelines as you operate and invest.

If you choose the former option, expect to pay $400 per hour with a tax attorney if you find yourself not getting the support and guidance you need from a document provider. I see that happen a lot.

Most self-directed plan providers charge between a few hundred dollars and up to $2,000 or more as a "setup and relationship fee".  What you get in terms of future access to support will vary, and while price is not always an indicator of quality, who is going to be able to dedicate resources to you years down the road if you only paid $500 or so?

The annual fee you reference is common, and relates purely to keeping your Solo 401(k) plan updated with amendments that come from new laws over time.  It is required by law that your plan stays current, so expect to see such an annual subscription fee.