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Recommended brokerage to set up solo 401(k) for mega backdoor ROTH?

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  • #16
    Originally posted by Marko-ER View Post
    I did it by myself for free with Vanguard.
    with what plan document?

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    • #17
      Can somebody explain to me the difference between the following three types of solo 401k providers and how it relates to MBDR?

      1) E-trade
      2) document services provider like mySolo401k and Ubiquity
      3) A third party administrator (example?)

      What exactly is the difference between a document services provider and a plan administrator? What else does a plan administrator do?

      Comment


      • #18
        third party admin is exactly what it sounds like. they administer the plan. as an example a competent TPA calculates allowed contribution amounts to ensure compliance with rules, provides proper forms that need completed, keeps records.

        in your list above, in scenario 1 and 2 you are the plan admin. so it's on you to not screw something up, no one holding your hand. there might be people you can ask questions to, they may or may not provide you with the right answer. in the end it's on you.

        in scenario 3 you pay a plan admin - like Employee Fiduciary. so you're much less likely to make a mistake as long as they're competent, as long as you work with them, tell them your goals and follow their advice

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        • #19
          • I see this advance of E-Trade into the MBDR space as significant. They are providing the same services for MBDR features that they and other mainstream one-participant 401k providers play for their plain vanilla offerings.
          • Just like with a plain one-participant 401k you are the administrator, but the major considerations are the amount and timing of contributions, affiliated employer issues and Form 5500-EZ filing if/when necessary.
            • As I mentioned previously, there is no IRS, tax software and contribution calculator support for maximum employee after-tax contributions at low to modest self-employed earned income.
            • Controlled/Affiliated Service Group issues are the same.
            • Form 5500-EZ issues are the same, but you will probably hit the filing limit sooner.
          • If E-Trade doesn't drop the ball on execution. I can't see any reason to pay a document reseller. When with E-Trade, you are getting the plan document, adoption agreement, custodial, record keeping and IRS reporting services all in one place for free.
          • I still see a value in TPAs for those uninitiated to the ins and outs of a one-participant 401k with MBDR and don't yet feel comfortable going at it alone.

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          • #20
            Originally posted by spiritrider View Post
            If E-Trade doesn't drop the ball on execution.
            The latest post on Bogleheads said E*Trade now hardcodes the non-deductible contribution election in the adoption agreement to "No" because they don't support it in their operations. For plans that selected "Yes" when it was an option, they didn't issue a correct 1099 form for the in-plan Roth rollover (no after-tax contribution in box 5).

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            • #21
              Harry, great to see you posting here!!

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              • #22
                Originally posted by Harry Sit View Post
                The latest post on Bogleheads said E*Trade now hardcodes the non-deductible contribution election in the adoption agreement to "No" because they don't support it in their operations. For plans that selected "Yes" when it was an option, they didn't issue a correct 1099 form for the in-plan Roth rollover (no after-tax contribution in box 5).
                Interesting.

                When I downloaded E-Trade's individual 401k Adoption agreement on 4-25 (just four days ago) it defaulted to yes. It sounds like further information is required from E-Trade. "Do they or don't they.?

                Maybe this falls under the old adage; "If it sounds too good to be true it probably isn't."

                Comment


                • #23
                  Originally posted by Nash22 View Post
                  I recently switched my contract from employee to independent contractor.

                  As such, I am now 1099.

                  If I understand correctly, I now have the ability to contribute the maximum limits via a solo 401(k) and convert all of this into a ROTH IRA via mega back door ROTH.
                  First, this is true, and I should do it, correct?

                  I already have an Roth IRA with Fidelity I have been using for backdoor ROTH for the past 3 years. Fidelity does not allow in plan conversions for their solo 401k, so I will have to look elsewhere, then I suppose roll it over eventually into my Fidelity ROTH IRA.

                  Can anybody recommend the best brokerage for what I am trying to do?

                  Thanks!
                  In the past I would say I don't think you're going to find a brokerage offering this for free. You're going to have to pay something. And you'll need more of a boutique firm. Should cost you less than $1000 to set up and just a few hundred a year though. You can start your search here:

                  https://www.whitecoatinvestor.com/retirementaccounts/

                  But I guess if eTrade is doing it now, why not try and let us all know how it goes. I've had a lot of complaints about eTrade service on solo 401(k)s over the years so expect some hassle.
                  Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                  • #24
                    Originally posted by The White Coat Investor View Post

                    In the past I would say I don't think you're going to find a brokerage offering this for free. You're going to have to pay something. And you'll need more of a boutique firm. Should cost you less than $1000 to set up and just a few hundred a year though. You can start your search here:

                    https://www.whitecoatinvestor.com/retirementaccounts/

                    But I guess if eTrade is doing it now, why not try and let us all know how it goes. I've had a lot of complaints about eTrade service on solo 401(k)s over the years so expect some hassle.
                    Jim- I had asked similar question to this thread a few months ago. At that time you had Mysolo401k on your recommendation page— gone now? Do you no longer recommend?

                    Comment


                    • #25
                      Originally posted by Timparsons952 View Post

                      Jim- I had asked similar question to this thread a few months ago. At that time you had Mysolo401k on your recommendation page— gone now? Do you no longer recommend?
                      Remember two things have to happen to get on our recommendation pages:

                      # 1 We have to think they're good
                      # 2 They have to pay us

                      Mysolo401k has never been on our recommendation page. Because of # 2. But I think they do a nice job.
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                      • #26
                        mysolo401k basically sells you a compliant plan document and helps you get setup. And they’ll provide you with forms and do your 1099 but you have to steer the ship. They don’t provide much guidance after setup. Not that they’re not knowledgeable. You get what you pay for.

                        Comment


                        • #27
                          Originally posted by spiritrider View Post
                          • I see this advance of E-Trade into the MBDR space as significant. They are providing the same services for MBDR features that they and other mainstream one-participant 401k providers play for their plain vanilla offerings.
                          • Just like with a plain one-participant 401k you are the administrator, but the major considerations are the amount and timing of contributions, affiliated employer issues and Form 5500-EZ filing if/when necessary.
                            • As I mentioned previously, there is no IRS, tax software and contribution calculator support for maximum employee after-tax contributions at low to modest self-employed earned income.
                            • Controlled/Affiliated Service Group issues are the same.
                            • Form 5500-EZ issues are the same, but you will probably hit the filing limit sooner.
                          • If E-Trade doesn't drop the ball on execution. I can't see any reason to pay a document reseller. When with E-Trade, you are getting the plan document, adoption agreement, custodial, record keeping and IRS reporting services all in one place for free.
                          • I still see a value in TPAs for those uninitiated to the ins and outs of a one-participant 401k with MBDR and don't yet feel comfortable going at it alone.
                          Thank you, this is basically my conclusion as well after a week or so of online research. I can see no reason to pay what is being referred to as a "document reseller" if there is still legwork to do on my part for compliance. If I am going to have to be responsible for any compliance at all, I would rather use the no cost option with E-trade, which is what I will do. Why would I pay for a service if I am still going to be responsible for compliance? I have not heard a good answer to this yet. The only reason I would do that is if I could mindlessly treat it like an IRA -- transfer my money and be done.

                          My plan is open the account with E-trade this week, maximally fund it to IRS limits all at once for 2022 (seems like I have coincidentally picked a good time to sock away $61k for the long haul), then backdoor the after-tax contributions.

                          What would be helpful is a guide to the compliance issues. A simple step-by-step for managing a MBDR through a solo 401k, including what forms to file, how to file, and when to file. I don't know what a 5500-EZ is, but I suppose I will have to learn. My concern is what else is out there that I may be missing? It can't be that complicated, but without a guide, it makes it tricky, and I think that if one existed, I would have found it by now. Hopefully someone smarter than I am on these matters takes the time to make a step-by-step "Managing a solo401(k) MBDR for dummies", as it would be very valuable for the community of self-employed physicians and small business owners.

                          Comment


                          • #28
                            Originally posted by Nash22 View Post

                            Thank you, this is basically my conclusion as well after a week or so of online research. I can see no reason to pay what is being referred to as a "document reseller" if there is still legwork to do on my part for compliance. If I am going to have to be responsible for any compliance at all, I would rather use the no cost option with E-trade, which is what I will do. Why would I pay for a service if I am still going to be responsible for compliance? I have not heard a good answer to this yet. The only reason I would do that is if I could mindlessly treat it like an IRA -- transfer my money and be done.

                            My plan is open the account with E-trade this week, maximally fund it to IRS limits all at once for 2022 (seems like I have coincidentally picked a good time to sock away $61k for the long haul), then backdoor the after-tax contributions.

                            What would be helpful is a guide to the compliance issues. A simple step-by-step for managing a MBDR through a solo 401k, including what forms to file, how to file, and when to file. I don't know what a 5500-EZ is, but I suppose I will have to learn. My concern is what else is out there that I may be missing? It can't be that complicated, but without a guide, it makes it tricky, and I think that if one existed, I would have found it by now. Hopefully someone smarter than I am on these matters takes the time to make one, as it would be very valuable for the community of self-employed physicians and small business owners.
                            the challenge may be getting E*Trade to do their part correct. It sounds like they don’t have this clean yet. If you go forward in trying this, report back.

                            Comment


                            • #29
                              “ It can't be that complicated, but without a guide, it makes it tricky”
                              There is a guide, but it is complicated.

                              Comment


                              • #30
                                Originally posted by Tim View Post
                                “ It can't be that complicated, but without a guide, it makes it tricky”
                                There is a guide, but it is complicated.
                                Where is the guide?
                                If the answer is the tax code, that isn't really what I'm looking for.

                                What I am looking for is something like:

                                Step 1. Open account at X
                                Step 2. Transfer money
                                Step 3. Convert money
                                Step 4. Fill out form Y and mail to address Z by this date if certain event happens
                                Step 5. When filing 1040 at end of year, do the following, etc.

                                With regards to E-trade doing their part correct, I'm still not exactly clear what they have to do. In other words, how do I know they've done "it" correctly?

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