Thursday, January 11, 2007

fidelity or 401kbrokers for our individual 401ks?

Based on an interesting post from My Personal Finance Blog discussing setting-up his individual 401ks.

I actually decided in the opposite direction: against going with 401kbrokers and instead going with Fidelity.

Although 401kbrokers does allow borrowing against a 401k account, I have a separate cash reserve, so that is not a significant requirement for me.

What is interesting is that I can invest in the various fidelity index funds, some spartan, mutual funds have expense ratios as lows as 0.08%. That sure beats whatever 401kbrokers offers, even if you can use Vanguard mutual funds - after all, they tack on 0.25% admnistrative fee.

Somehow I have a visceral dislike for any kind of aum based admninisrative fee.

Also, there's less institutional risk - Fidelity has been around alot longer than 401kbrokers.



Anonymous said...

I'm a bit confused... Don't you have a 401k with your employer? Can you also have a solo 401k for a side-business?

makingourway said...

You can have a 401k with your employer and an individual 401k if you have a side business.

Your aggregate contributions (of the two) cannot exceed the limits of a 401k plan; i.e. no more than $15,500 in salary deferals and $4x,000 in total profit share/match, etc....

regards, m

mOOm said...

hmm yes I guess that is pretty obvious. Could be a good solution if you don't like your main employer's 401k plan?

There are just way too many different account types in the US retirement system!

makingourway said...

the more the better - maybe confusing for some, but more flexibility for all!
It's only an effective alternative if you have sufficient income from your side business to take advantage of the deductions.
regards, m