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Solo Roth 401k asset allocation at TD Ameritrade

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  • Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 26
    Joined: 12/13/2018

    So I just opened my solo roth 401k for 2018 for myself in my S corp LLC dental business where I am a contract dentist at a private office.  I funded it with $18,500 for 2018 as the employee portion in a lump sum. I am the only employee.  I will add an employer portion in the next couple months.  Now I need to know the best asset allocation for the long run as I am only 35 years old now.

    When I went to them and asked for a low cost index fund for the total market they said there is a $49.99 trade fee each time.  Ouch!  There are 4000 mutual funds that are commission free, but when I went down the rabbit hole of narrowing the search I could not find any of the big hitters that I hear you guys and bogle heads talk about.  So what do I invest in?  I am looking for automatic investing to put money in every month or quarter and have it automatically invested (they said that’s impossible as I have to manually punch it in each time), lowest management fees possible, no or low commission fees, following the indexes (not actively managed), etc.

    How do you all do it?

    I thought all I needed was 65% VTSAX total market, 20% VTIAX international, and 15% VBTLX total bond (as a basic example).

    I have heard of other ones like VOO s and p 500, VTI total market, and VTSMX Vanguard Total Market.

    Even if I try the ETF route there is still a $6.95 trading fee each time per fund.  So I thought I may go that route and just contribute each quarter instead of each month.

    Any thoughts?

    Thank you!

     

    #179629 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1998
    Joined: 03/01/2018
    So I just opened my solo roth 401k for 2018 for myself in my S corp LLC dental business where I am a contract dentist at a private office.  I funded it with $18,500 for 2018 as the employee portion in a lump sum.

    Click to expand…

    Where is your 401k at? Did you open it yourself, or did someone help you?

    I assume you opened the solo 401k in calendar 2018?

    Did you make your employee contribution with your final payroll for the year, the contribution coming from the Corp account?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179639 Reply
    Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 26
    Joined: 12/13/2018

    It is at TD Ameritrade, cash account waiting to be invested in ETFs or low cost index funds.  I opened it myself for the year 2018 on 12-22-18.  I funded it via doing a capital contribution from my personal account to my business checking account, then wrote a check from my business checking to TD Ameritrade…

    #179650 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1750
    Joined: 02/01/2016

    As alluded by @jacoavlu. There are very specific 401k requirements for S-Corp W-2 employees.

    401k employee elective contributions for an S-Corp 2% shareholder-employee must be:

    • After the later of the one-participant 401k effective date, adoption agreement date, or employee elective contribution election date.
    • Deducted from compensation not already received with a pay date no later than 12/31.
    • Contributed by the S-Corp as soon as they can be reasonably segregated from S-Corp assets.

    Unless all of the above are true, this was an excess employee deferral. It must either be removed with earnings or recharacterized as employer contributions.

    Employer contributions can be based on compensation received after the effective date, but must be contributed from S-Corp assets, but could be from any basis including capital contributions and loans. However as already stated, 2018 employee elective contributions must be deducted from compensation with a 2018 pay date.

    It is only a self-employed individual who has full flexibility with regards to employee elective contributions and employer contributions as long as the one-participant 401k is adopted and an employee elective contribution election is made by 12/31 and the effective date is 1/1.

    #179659 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1998
    Joined: 03/01/2018

    Assume what the OP should have done would have been to do final payroll at year end after opening of the solo 401k and Corp paid shareholder-employee enough wages to defer $18,500 from that pay period.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179684 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1750
    Joined: 02/01/2016

    That is correct.

    #179691 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1998
    Joined: 03/01/2018

    Of course all should not be lost for the OP. They could reach the annual addition limit $55k in 2018 via employer contributions only as long as compensation is 55,000 / 0.25 = $220,000 or greater, correct?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179709 Reply
    Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 26
    Joined: 12/13/2018

    Would it matter if I put this 18,500 in as a Roth, not a traditional? Since I am not trying to defer any income on a later date. Also, I take qualified distributions from the business regularly to my personal account just to get a bit higher interest rate in a money market rather than checking account. But I had taken too much out by the time I needed the 18,500… So I basically added it back as a capital contribution. The money really came from the business in the first place. Does that make a difference?
    Thank you!

    #179760 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3789
    Joined: 01/08/2016

    It probably shouldn’t be Roth.

    I’m sure there are very adequate commission free index ETFs at TDA.

    #179815 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1998
    Joined: 03/01/2018

    Roth vs traditional doesn’t matter in terms of compliance. You should re-read spiritrider’s post and take his advice.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179821 Reply
    Liked by Hank, Flapper

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