A solo 401(k) allows small business owners to save up to $57,000 for retirement―63,500 if you’re 50 or older―through tax-free salary deferrals and company contributions. Choosing the right provider is an important part of using a solo 401(k) successfully and not getting yourself in trouble with the IRS. We’ve reviewed many solo 401(k) providers and compare the best below, including their costs and investment options.
Companies like ShareBuilder 401k are experienced solo 401(k) providers that allow solopreneurs to maximize their retirement savings at an affordable price. Clients get access to a low-expense, diverse, high-quality fund lineup and an easy to use online portal.
Top 5 Solo 401(k) Providers
(Best overall) Anyone who wants a low-cost, easy-to-set-up Solo 401(k)
An all-online plan with low-cost investments and easy administration
Banking and brokerage services in addition to a Solo 401(k)
Owners looking for checkbook control
People who want to trade stock and other securities actively in their retirement account
Vanguard: Best Overall Solo 401(k) Provider
Vanguard is the best overall solo 401(k) provider because it’s an extremely reputable company that offers no-frills, low-cost investments. As the largest mutual fund company in the world, Vanguard provides simple, straightforward plans with access to professionally managed funds. Although it lacks additional services and other investment options, Vanguard provides clients with generous cost savings for solo 401(k)s.
What Vanguard Offers
Vanguard is the largest mutual fund company in the world, with more than $4.5 trillion in assets under management. Its family of funds includes more than 100 professionally managed mutual funds that are ideal for any investor. Moreover, Vanguard has a great reputation as a low-cost provider of investments and custodial accounts like solo 401(k)s.
Vanguard offers proprietary funds to all of its retirement account customers at some of the lowest costs you’ll find among any mutual fund family. In a solo 401(k) set up through Vanguard, investments options include the following Vanguard funds:
- Money market mutual funds: Money market funds invest in certificate of deposits (CDs) and short-term debt to provide investors with a small interest rate and high liquidity.
- Bond funds: Debt-focused mutual funds include a portfolio of bonds designed to provide the portfolio with interest income.
- Equity funds: Equity funds aim for price appreciation by concentrating investments in small-, mid-, or large-cap stocks.
- International funds: In contrast to domestic funds, international funds focus investments in foreign assets to benefit from currency fluctuations.
- Target date funds: Vanguard has some of the best target date funds in the industry, which are funds that shift automatically from stocks to safer investments like bonds as you get closer to your target retirement age.
Vanguard offers a very straightforward, cost-efficient solo 401(k) product. It does not provide additional services such as loan facilities, checkbook control, or even standard banking services.
Vanguard Solo 401(k) Costs
Vanguard is extremely straightforward with its solo 401(k) costs. There are no account maintenance fees or trading costs, which is a big plus. Solo 401(k)s cost $20 per year for each fund that’s used in the plan. These fees can be waived for account holders who qualify for Flagship Select, Flagship Voyager Select, or Voyager Services.
The typical Vanguard Solo 401(k) costs are:
- Average fund expense ratio: These fees―0.10% per fund―are paid directly for each fund you invest in to cover the costs of trading and fund management.
- Annual fund fees: $20 per year for each fund you use within your solo 401(k).
ShareBuilder 401(k): Best for Low-cost Model Portfolios
ShareBuilder 401k was founded to make 401(k) plans accessible to everyone, including businesses with no other employees besides the business owners. ShareBuilder 401k offers low-cost plans that can be established and administered completely online. They include low-cost investment options, such as index exchange-traded funds (ETFs) and model portfolios, which are selected by an investment committee comprised of industry professionals.
What ShareBuilder 401k Offers
ShareBuilder 401k is focused on offering low-cost 401(k) plans to small businesses of all sizes. While most 401(k) companies help small businesses with as few as 10 to 12 employees, ShareBuilder 401k is unique because it can serve small business owners with no employees besides themselves.
ShareBuilder 401k’s investment committee is comprised of industry professionals and has established a lineup of low-cost investment options, including:
- Index ETFs: ShareBuilder 401k provides about 10 low-cost index ETFs that have annual expense ratios of 0.39% or less―as low as 0.03%.
- Model portfolios: Participants can use one or more of ShareBuilder 401k’s five model portfolios, each composed of mutual funds, ETFs, real estate investment trusts (REITs), and other investments.
ShareBuilder 401k offers 401(k) plans for self-employed individuals as well as businesses with numerous employees. This flexibility makes ShareBuilder 401k an ideal offering for small business owners who may add employees later who could be eligible for their 401(k).
ShareBuilder 401k focuses on helping small business owners with areas, such as:
- Plan administration: ShareBuilder 401k administers 401(k) plans and handles all record keeping and IRS testing.
- Investment platform: Participants in plans can invest in ETFs and model portfolios easily through ShareBuilder 401k’s online platform.
ShareBuilder 401k Costs
Solo 401(k) plans from ShareBuilder 401k have flat fees that vary based on the number of owners of your business. Plans start at $150 for setup and as little as $25 per month, plus investment-specific fees that are deducted automatically from your account.
ShareBuilder 401k costs for a solo 401(k) include:
- One-time setup fee ($150): The cost to set up a plan is flat, no matter how many owners your business has who are eligible to participate.
- Plan administration fee ($25 per owner per month): Monthly plan costs vary based on the number of participating owners and employees.
- Annual fund fee: Plan participants pay annual investment fees that vary based on the investment options they choose. These fees are deducted directly from participant accounts and range from 0.03% to 0.39% for index ETFs and 0.06% for model portfolios.
Charles Schwab: Best for Businesses That Need Additional Banking Services
Charles Schwab offers a solo 401(k) that’s ideal for small business owners who need additional brokerage or banking services. As an established, diversified financial services company, Charles Schwab offers clients a full array of services ranging from investment advice to consumer banking, plus a wide range of lending facilities designed to meet every potential need.
What Charles Schwab Offers
For most business owners, Charles Schwab is a one-stop-shop. If you need business lending or other services in addition to a solo 401(k), it’s a great option. However, its solo 401(k) is competitively priced with no account maintenance or service fees. Solo 401(k)s have no trade charges, making them a cost-effective solution.
Once you’ve set up a solo 401(k) and started contributing, you have access to several different types of investments through Schwab. Some of the typical types of investments available include:
- Stocks: Stocks of individual companies traded on exchanges or over the counter that can be traded actively within your account.
- Bonds: Individual bonds issued by companies, countries, or municipalities that can be traded actively in a solo 401(k) account.
- Mutual funds: In addition to Schwab’s proprietary mutual funds, thousands of additional funds are available through their trading platform.
- Target date funds: Like Vanguard, Schwab has its own target date funds, and you can also access third-party target date funds through Schwab.
- ETFs: ETFs represent baskets of securities—similar to mutual funds—that trade like normal stocks. Schwab offers its own ETFs at no cost and thousands of other ETFs on its platform.
The add-on services available to Schwab customers are considerable, though they come with added costs. Online brokerage, business banking, and a full lineup of lending solutions are available to small business owners and the self-employed.
Specific additional services include the following:
- Business banking: Schwab is a fully licensed commercial bank that can provide checking and savings accounts, cash management services, and a host of other banking services.
- Lending: As part of its banking group, Schwab can arrange loans for clients who qualify. Schwab also provides margin accounts for those who have savings outside their 401(k) that they want to invest.
- Online securities brokerage: Schwab’s trading platform gives investors access to thousands of stocks, bonds, ETFs, and other traded securities.
- Investment advisory services: If you need individual guidance choosing your investments, Schwab can help to provide specific investment advice based on your individual circumstances.
Schwab Solo 401(k) Costs
Schwab doesn’t charge monthly or annual account fees but, instead, charges account holders commissions based on the type of trade. Trading commissions are free for United States stocks, 65 cents per contract for options, $5.95 for foreign stocks, and $1 per bond on bond trades. Commissions are also waived for trades in mutual funds and Schwab’s proprietary ETFs. Additional costs are involved for other services, including business banking and lending.
While Schwab waives commissions on trading in mutual funds, most mutual funds do charge expense ratios to cover the cost of trading and fund management. While 0.21% to 1.92% is the typical expense ratio for available third-party funds, Schwab’s proprietary index funds have expense ratios of under 0.39% per year.
Rocket Dollar: Best for Business Owners Who Want Checkbook Control
Rocket Dollar is one of the newest companies offering solo 401(k) products to business owners as it was founded in 2018. Its founders were motivated by the belief that the nature of retirement is changing, so retirement investing should change with it. Its self-directed 401(k) accounts provide checkbook control, which means business owners aren’t limited to traditional retirement account investments but instead have the ultimate flexibility when it comes to where their tax-advantaged retirement savings should go.
What Rocket Dollar Offers
Rocket Dollar offers a self-directed solo 401(k) with checkbook control, which means that you can invest your solo 401(k) contributions in any investments you’d like. You can also open a self-directed IRA, but the company doesn’t have the option to get other financial services. Rocket Dollar provides a choice of traditional and Roth 401(k) accounts and allows you to open an account in as little as one week if you opt for expedited processing.
Because Rocket Dollar provides checkbook control, you have complete flexibility when it comes to investing your 401(k) funds. You can invest in anything the IRS allows, including:
- Stocks and bonds: Stocks and bonds are common investments, with stocks carrying a higher risk but more potential reward. While bonds allow investors to profit as the issuer repays the debt, stocks allow profits when a company becomes more valuable or when a company pays dividends.
- Startups: It’s possible to invest in your own new business or someone else’s and to profit as the business grows or if the company is sold.
- Real estate investments: Real estate investing could mean directly purchasing properties or pooling money with other investors to get an ownership stake in investment properties.
- Cryptocurrency: Bitcoin and other virtual currencies rely on the blockchain and a centralized ledger to control the currency supply, rather than central banks.
- Loans, debts, and promissory notes: This could include investing in tax liens, hard money loans, or other types of loans to make money as debts are repaid.
- Precious metals: This could include buying silver and gold.
- International investments: Money can be invested across the globe in foreign assets or foreign currencies.
Before investing in many of these nontraditional 401(k) investments, consult with a tax advisor to make sure you follow all the rules. Penalties can be steep for inadvertent mistakes on startup, real estate, or cryptocurrency investments. Do your due diligence.
Rocket Dollar provides assistance with preparing Form 5500-SF (Short Form Annual Report of Small Employee Benefit Plan) for electronic filing. However, it is limited in the other services it provides. You are required to calculate your own contributions to your 401(k) as well as to manage your own investments. Rocket Dollar does administer 401(k) loans, and it provides an online knowledge base so that you can learn more about managing a self-directed 401(k).
Rocket Dollar Solo 401(k) Costs
Rocket Dollar charges both an upfront setup fee as well as monthly costs associated with maintaining your solo 401(k). Costs you can expect to incur include:
- Account setup fee: $360
- Administration fees: $15 per month
Individual investments you select will have their own fees, such as closing costs if you invest in real estate and transaction fees for cryptocurrency investments.
E-Trade: Best for Those Who Seek Active Trading
An E-Trade solo 401(k) is most appealing for small business owners who do many individual stock and bond trading in their accounts. E-Trade started as an online discount brokerage firm. Although they’ve expanded to accommodate different account types like solo 401(k)s, online trading for active investors remains their core offering.
What E-Trade Offers
E-Trade offers solo 401(k)s that give account holders access to online trading in any number of listed securities. E-Trade even gives you full trading access from your phone or mobile device. It has a trading platform that is built around its clients’ needs. E-Trade is good for investors who want access to many types of securities and the ability to trade them actively.
E-Trade opens up investor options within a solo 401(k) to almost any listed security, including:
- Stocks: Investors can trade in shares in most listed companies.
- Bonds: Although known primarily for trading stocks, E-Trade gives investors access to more than 30,000 types of fixed income products.
- Mutual funds: E-Trade isn’t the best option for mutual funds, but investors on their platform can access several thousand third-party options.
- ETFs: E-Trade is a good platform for trading ETFs, which are portfolios of individual securities like mutual funds that trade like stocks.
- Options: Account holders can also trade in options contracts on underlying securities.
In addition to its core offering, E-Trade also offers additional services:
- Lending facility: E-Trade provides investors with loans against their retirement assets.
- Some banking services: E-Trade has a banking arm that provides checking and savings accounts online, in addition to free use of ATMs nationwide.
- Mobile access: As an online provider, E-Trade provides clients with full access to their banking and brokerage services online. It also provides greater flexibility for banking and trading through mobile devices than is typical with most providers.
Although E-Trade was founded as an online discount brokerage firm, it has built out its services around retirement benefits and other client needs. The firm now grants solo 401(k) account holders the same degree of trading flexibility and many of the same services. Solo 401(k) users can even borrow against retirement assets—a service usually found in more traditional banking institutions or alternative online providers.
E-Trade Solo 401(k) Costs
Typical costs for an E-Trade solo 401(k) include:
- Stocks: Free
- Bonds: $1 per trade
- Mutual funds: Prices vary. Free for more than 4,400 funds. Mutual funds also charge expense ratios that start at 0.15% and range up to more than 2% for specialty funds.
- ETFs: $6.95 per trade
- Options: 50 cents to 75 cents per contract
Compared to other providers, E-Trade remains very competitive on cost. However, trading still isn’t free, and costs can add up very quickly for account holders who trade too frequently. Day trading isn’t recommended in retirement accounts like solo 401(k)s, but it’s available with E-Trade for those who want access.
How We Determined Which Solo 401(k) Provider Is Best
Solo 401(k)s are very different from typical 401(k)s, although the IRS treats them almost the same. People using solo 401(k)s have very different concerns than most 401(k) users and choose from very different providers. This is because solo 401(k) providers have different billing structures, investment options, and add-on services.
We looked at traditional banks and brokerage firms, mutual fund companies, and online alternatives that offer checkbook control. Here are the criteria we used to determine the best solo 401(k) providers:
- Ease of setup: We considered the ease of setting up a plan, automating contributions, and administration of the account.
- Investment options: The flexibility given investors to seek returns in mutual funds, stocks, bonds, ETFs, or alternative assets.
- Costs: The expenses related to account implementation, maintenance, and trading.
- Customer service: The availability of assistance or individual guidance and how easy it is for clients to make changes in their account.
- Additional services available upon request: What other services are offered by providers that might be beneficial, in addition to a solo 401(k).
After looking at all of the criteria, if you already have a relationship with a provider, they’re probably your best option.
Alternative Options to a Solo 401(k)
If you aren’t sure if a solo 401(k) is right for you, you may want to consider another type of retirement benefits account, such as a simplified employee pension (SEP) or a traditional IRA. Both offer advantages and, as IRAs, they avoid the administrative costs that can come with 401(k)s.
SEP IRAs are great potential alternatives for self-employed individuals and small business owners who want to contribute up to 25% of income or $57,000 without the headache of administering a 401(k). Compared to solo 401(k)s, SEP IRAs are a superior option if you make more than $75,000 per year and don’t plan to hire any employees in the future.
Of all retirement accounts, traditional IRAs are the most simple and straightforward and the easiest to set up and administer. Unlike solo 401(k)s or SEPs, traditional IRA contribution limits are $6,000 per year―$7,000 per year if you are age 50 or older. Still, traditional IRAs are great options for small business owners who can’t afford to contribute more than a few thousand dollars per year. For those wanting to make after-tax contributions, consider a Roth IRA.
Once you’ve decided you want a solo 401(k), it’s important to consider certain factors to determine which provider is best for you. These factors include cost, investment options, and additional services. While solo 401(k)s are very similar across providers, there are differences in these areas that will determine which provider is best for your particular situation.
For a low-cost, full-featured 401(k) plan that can grow as you do, consider ShareBuilder 401k. Opening a solo 401(k) with ShareBuilder 401k has a one-time setup fee of $150, and ongoing administration costs start at just $25 per month.