Know Why You Need to Pay Fees to Your Solo 401(k) Provider

If you have eventually decided to open a Solo 401(k), it makes sense to acquaint yourself with the associated fees.

Your Solo 401(k) provider cannot provide you its services free of costs as there are costs involved in maintaining the account.

Indeed, there are not many administration requirements because a Solo 401(k) has only one participant. But there are costs involved so that the service provider will charge you a fee. 

Usually, the Solo 401(k) providers charge custody fees plus mutual fund expense ratios and commissions for trading individual stocks, bonds, or exchange-traded funds (ETF). 

Solo 401(k) Costs

Typically, the costs for a Solo 401(k) include:

Custodian Fee

Providers charge a custodian fee that usually ranges from $25 to $50. The fee is for holding your account. 

Trading Commissions

Trading commissions vary from $5 to $25 per trade. You need to pay the commissions if you set up your Solo 401(k) to trade stocks, bonds, or ETFs.

Mutual Fund and ETF Expense Ratios

These ratios vary from 0.035 percent to 1.5 percent and account for the costs of trading and fund management.

Administrative Charges for Self-Directed 

Usually, alternative providers charge these fees that normally range from $200 to $2,000. These providers deal with specialty investments, such as real estate. 

The charges can be flat fees, a percent of your account value, or a fee per asset in your account.

Figure Out Your Eligibility

Before you open a Solo 401(k), you need to understand the eligibility requirements and thus determine whether you are eligible.

Keep in mind that a Solo 401(k) or Individual 401(k) is a specially designed plan for only a single participant, the business owner. You will not be eligible for the plan if you have full-time employees who would qualify for a 401(k).

There is a lot to know about the Solo 401(k) plan. And you can refer to the infographic in this post to all about a Solo 401(k).