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individual 401(k) question

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  • individual 401(k) question

    I am between fidelity and vanguard for setting up my individual 401(k) and noticed something on the vanguard site that no one has mentioned from what I can tell (and I may be reading it wrong, who knows). It says the following:

    "$20 per year for each Vanguard fund held in a Vanguard Individual 401(k) account. If at least one participant qualifies for Flagship Select™, Flagship®, Voyager Select®, or Voyager® Services, the account service fee will be waived for all participants in the plan. However, if the plan administrator is the only person enrolled in Flagship Select, Flagship, Voyager Select, or Voyager Services, but he or she doesn't participate in the plan, the fee will apply."

    $20/year for each fund? That seems like a lot to me. I confirmed with Fidelity that there is no yearly fee. Am I missing something here?

  • #2
    Yes until you reach the voyager level, 50K I think.


    • #3
      Hopefully you'd hit the 50K level within the first 2 years.  The other drawback of the Vanguard fund is the inability to purchase Admiral shares which will run you about 0.1% more in expense ratio on the average fund.  Admittedly it will only cost you $100 a year for $100k in funds, but over 30 years it could represent up to a 3% difference in total account value per vanguard's own blog post.  The main drawback to Fidelity as far as I can see is the requirement to mail paper checks for each contribution.  I just mailed my paperwork to Fidelity so I can't comment on how it looks from the inside quite yet.  The Vanguard SEP IRA I currently have is pretty much on autopilot since the day I started it with electronic contributions.

      Also, while fees do matter I think it pales in comparison to adjusting your savings rate.  There are so many other places to save/earn $100 dollars a year that I don't think it should matter.  If your account gets up to a million and you're paying an extra $1000 a year in ER with Vanguard you could just move it then. If Vanguard allowed my SEP IRA to rollover into a 401k I probably would have stayed there despite the costs because I prefer everything to be automated.


      • #4
        Take a look at TD Ameritrade. I have set up solo 401(k)s there, and I do not believe that they have any monthly fees or account minimums to avoid an annual fee. They also have a Roth option, permit loans, and you can set up direct contributions.


        • #5
          We went with fidelity.  TDA probably worth a look too.