Fidelity Self Employed Retirement Plans

Processing Solo 401k Loan Question:

I received the rollover check from John Hancock for my former employer 401k and will go into the local Fidelity Investments office tomorrow to deposit the check into the new brokerage account that you helped me set up for the self-directed solo 401k that you provide. I would like to make sure I understand the process to create a solo 401k participant loan against the balance. I think you all create the paperwork. Whats the method to move the loan amount from the fidelity account into my personal checking account. Do I just use the fidelity transfer functionality, get a check drafted or ?

Also, I will be rolling over an IRA account as well. Am I limited to 1 loan or can I take out a second loan against the additional amount?

My Property Is My Pension

The differing attitudes to property wealth between the employed and self-employed goes some way to explaining the low pension rates among the self-employed.

According to the ONS wealth and assets survey1 42% of self-employed workers were found to view investing in property as the safest way to save for their retirement.

This belief is reflected in the relative property wealth for those self-employed when they reach retirement for those aged 55 and above, the share of the self-employed owning net property wealth greater than £500,000 is 28.3% versus 12.7% of employees2.

1Early indicator estimates from the Wealth and Assets Survey: attitudes towards saving for retirement, automatic enrolment into workplace pensions and financial situation, July 2016 to December 2017, ONS, August 2018.2Trends in self-employment in the UK, ONS, February 2018.

Best For Low Fees: Charles Schwab

Charles Schwab

The Individual 401 Plan from Charles Schwab is our top choice for low fees. The account has no opening or maintenance fees as well as no commission trades for stocks or ETFs and over 4,000 no-load, no-transaction-fee mutual funds. Customers can also use its robo-advisor, Schwab Intelligent Portfolios, with no extra fees.

• Accounts are free to open and charge no recurring fees

• Access to trade stocks, ETFs, and thousands of mutual funds for free

• Option for a no-cost robo-advisor

• No solo 401 loans

• High fees for some mutual fund trades and broker-assisted trades

Charles Schwab is our top choice for low fees in a solo 401 plan. Schwabs version charges no recurring fees and no setup fees. It offers commission-free trades for all stocks and ETFs as well as over 4,000 no-transaction-fee funds on the Schwab OneSource funds list. While Schwab offers excellent customer service, be aware that automated phone trades cost $5 and broker-assisted trades cost $25 each. However, many customers could use this account without paying any fees.

Schwabs Solo 401 doesnt offer 401 loans. Its active investment platform may not satiate all expert investors, and its active charting and analysis tools lag behind some other brokerage platforms for active traders. However, the pending integration of TD Ameritrade will bring the coveted thinkorswim platform under the Schwab umbrella, which is something active traders at Schwab can look forward to.

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Next Steps To Consider

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

Why Saving Is Hard For The Self

The reasons for not saving toward retirement wont be a surprise to any self-employed person. The most common include:

• Lack of steady income
• Education expenses
• Costs of running the business

Setting up a retirement plan is a do-it-yourself job, just like everything else an entrepreneur undertakes. No human resources staffer is going to walk you through the company-sponsored 401 plan application. There are no matching contributions, no shares of company stock, and no automatic payroll deductions.

Youll have to be highly disciplined in contributing to the plan and, because the amount you can put in your retirement accounts depends on how much you earn, you wont know until the end of the year how much you can contribute.

Still, if freelancers have unique challenges when saving for retirement, they have unique opportunities, too. Funding your retirement account can be considered part of your business expenses, as is any time or money you spend on establishing and administering the plan. Even more important, a retirement account allows you to make pretax contributions, which lowers your taxable income.

Many retirement plans for the self-employed allow you, as a business owner, to contribute more money annually than you could to an individual IRA.

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Solo 401 Contribution Limits

The total solo 401 contribution limit is up to $58,000 in 2021 and $61,000 in 2022. There is a catch-up contribution of an extra $6,500 for those 50 or older.

To understand solo 401 contribution rules, you want to think of yourself as two people: an employer and an employee . Within that overall $58,000 contribution limit in 2021 and $61,000 in 2022, your contributions are subject to additional limits in each role:

• As the employee, you can contribute up to $19,500 in 2021 and $20,500 in 2022, or 100% of compensation, whichever is less. Those 50 or older get to contribute an additional $6,500 here.

• As the employer, you can make an additional profit-sharing contribution of up to 25% of your compensation or net self-employment income, which is your net profit less half your self-employment tax and the plan contributions you made for yourself. The limit on compensation that can be used to factor your contribution is $290,000 in 2021 and $305,000 in 2022.

Keep in mind that if youre side-gigging, employee 401 limits apply by person, rather than by plan. That means if youre also participating in a 401 at your day job, the limit applies to contributions across all plans, not each individual plan.

Rollover Of Former Employer 401k Plan Held At Fidelity Investments After Participant Loan Payoff Question:

For my existing 401k account with Fidelity from my previous employer, I am ready to do the rollover after the 401k participant loan payment I had on the account and been paid off. I want to check if I should wait for the new Fidelity brokerage account for the solo 401k plan that I opened with your company before I request the direct-rollover of the former employer 401k , or I can request the direct-rollover check now?

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Pick A Plan And Start Saving

Time is one of the most important factors when it comes to building up your retirement fund. While you’re young, time is on your side. Don’t let the absence of a workplace retirement plan like a 401 stand in your way. There are plenty of other retirement savings optionspick a plan and start saving and investing.

Timing Of The Brokerage Account Setup

After submitting the Fidelity brokerage forms to Fidelity Investments, between 5-7 business days , you should receive an email from Fidelity Investments that their system has updated your email address. This indicates the application is in processing.

When you start receiving emails from Fidelity, you can check if the account has been fully setup without having to wait on the Fidelity Welcome Letter in the mail which includes your new account number. Please try to log in using one of the following methods:

• If you have an existing Fidelity login , you should see the new Non-Prototype account appear under your portfolio with an account number that starts with the letter Z.
• If you do not have an existing Fidelity login, you can try to register to Fidelity.com at the following link: You will need to create a username and password.

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Strategies For Saving When Youre Self

The joys of self-employment are many, but so are the stressors. High among those is the need to plan for retirement entirely on your own. You are in charge of creating a satisfying quality of life post-retirement. When it comes to building that life, the earlier you start, the better. Luckily, there are several retirement plans for those who are self-employed.

Compare Fidelity’s Small Business Plans

We offer retirement plans for businesses of every shape and size. Visit the following product pages for more information. If you have a separate retirement plan established and would like to invest the assets in a Fidelity brokerage account, you may be interested in an Investment-Only Retirement account.1

If you have an existing 401K plan for your employees under another provider, learn more about the support and value we can deliver with a Fidelity 401.

no employeeswith only a few employees25 to 100 employees100 or fewer employeesWho contributesAccess to assets3Contribution featuresFees

Interested in a Fidelity HSA® for your small business? Learn more

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Pensions For The Self Employed

Important information – The value of investments can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. It is important to understand that pension transfers are a complex area and may not be suitable for everyone.

Best For Real Estate: Rocket Dollar

Rocket Dollar

Rocket Dollar allows you to invest in anything you can pay for with a checkbook. That means you can invest in real estate and other non-traditional assets while enjoying the tax advantages of a solo 401 account.

• Checkbook control allows you to invest in real estate and other alternatives

• Support for 401 loans and Roth contributions

• Option for upgraded account that includes free wire transfers, checks, tax form filing, and other features

• Basic accounts require $15 monthly fee and $360 setup fee

• Premium accounts require a $30 monthly fee and $600 setup fee

If you dont want the limitations of traditional financial markets, you may want to consider Rocket Dollar. Instead of stocks, ETFs, mutual funds, and bonds, Rocket Dollar accounts give you the control to buy any asset with your solo 401 that the IRS allows. That can include rental properties, fix-and-flip real estate, or land that you think will appreciate in value. You can invest outside of real estate as well, such as private investments in a startup or precious metals, however, Rocket Dollar’s flexibility makes it the solo 401 that’s best for real estate.

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Setting Up A Solo 401

Some paperwork is required, but its not too onerous. To establish an individual 401, a business owner has to work with a financial institution, which may impose fees and limits as to what investments are available in the plan. Some plans may limit you to a fixed list of mutual funds, but a little bit of shopping will turn up many reputable and well-known firms that offer low-cost plans with a great deal of flexibility.

Generally, 401s are complex plans, with significant accounting, administration, and filing requirements, says James B. Twining, CFP, founder and wealth manager of Financial Plan. However, a solo 401 is quite simple. Until the assets exceed $250,000, there is no filing required at all. Yet a solo 401 has all the major tax advantages of a multiple-participant 401 plan: The before-tax contribution limits and tax treatment are identical.

Tips To Maximize Contributions

• Consider the Retirement Savers Credit. The credit begins to phase out at $65,000, but the credit is 50%, 20% or 10% of your retirement plan depending on your adjusted gross income.
• Dont forget the profit sharing contribution. Remember you can get to the maximum contribution of $57,000 by making profit sharing contributions over and above the employee deferral. Check your plan document.
• Consider adding a defined benefit plan. A defined benefit plan can supplement your 401k retirement contributions. You may be able to add $100,000 in contributions.
• Catch up contributions. Remember that if you are 50+ years of age you can contribute an addl $6,500. This can accelerate your savings.
• Consider a Mega Backdoor Roth IRA. If a Roth interests you, consider a Mega Backdoor Roth IRA. This can get you to the 401k max if you cant get there with profit sharing.

If you work for yourself in any capacity, consider looking into a Solo 401K. Youll set yourself on the right track for retirement while fulfilling your dreams of working for yourself and creating your own place in the world. Fidelity offers many opportunities to open your own 401K for very few costs and with plenty of advice along the way.

Its never too late to think about your retirement and your financial future consider your future today and see how you can start saving for your retirement.

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Withdrawing Funds From A Self

As with traditional 401 plans, the self-employed 401 is intended to help you save money for retirement, and there are regulations in place to encourage you to do so. For example:

• Withdrawals prior to age 59½ may be subject to a 10% early withdrawal penalty, along with any applicable income taxes1
• You must take required minimum distributions from self-employed 401s beginning at age 722
• Plans can be structured to allow loans or hardship distributions3
• Plans can be structured to accept rollovers from other retirement accounts, including SEP IRAs and traditional 401s, into your self-employed 401
• You can roll your self-employed 401 assets into another 401 or an IRA

Because of its high contribution levels, flexible investment options, and relatively easy administration, the self-employed 401 is an attractive option for small-business owners or sole proprietors who want to be able to save aggressively for the future.

If there is the potential that your business might add employees at a later date, however, know that you will either have to convert your self-employed 401 plan to a traditional 401, or else terminate it. But if you’re confident that you will remain a one-person operation, and you want the high savings options that these plans offer, this type of account may be a good fit.

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Best For Account Features: E*trade

E*TRADE gives you more flexibility with its solo 401 offering. E*TRADE supports both traditional individual 401 plans and Roth 401 plans. You are also able to take out a loan on your 401 balance at E*TRADE, all of which makes E*TRADE best in our review for account features.

• Choose between traditional or Roth 401 contributions

• Support for 401 loans

• No recurring account fees, and commission-free stock and ETF trades

• Now run by Morgan Stanley, meaning changes are likely

• High fee for broker-assisted trades and some mutual fund trades

E*TRADE has a long history of supporting online investors, with its first online trade placed in 1983. It is now a subsidiary of Morgan Stanley after an acquisition that closed in October 2020. At E*TRADE, you can choose between traditional and Roth individual 401 plans, which allows you to choose between pre-tax and post-tax contributions. You can also take a 401 loan from an individual 401 account at E*TRADE.

There are no listed fees to open or keep a solo 401 account at E*TRADE. Stock and ETF trades are commission free. The brokerage also supports over 4,400+ mutual funds on its no-load, no-transaction-fee list. E*TRADE supports options, futures, and fixed-income bonds and CDs, as well.

Read our full E*TRADE review.

How To Open A Solo 401

You can open a solo 401 at most online brokers, though youll need an Employer Identification Number. The broker will provide a plan adoption agreement for you to complete, as well as an account application. Once youve done that, you can set up contributions. Youll have access to many of the investments offered by your broker, including mutual funds, index funds, exchange-traded funds, individual stocks and bonds.

If you want to make a contribution for this year, you must establish the plan by Dec. 31 and make your employee contribution by the end of the calendar year. You can typically make employer profit-sharing contributions until your tax-filing deadline for the tax year.

Note that once the plan gets rocking, it may require some additional paperwork the IRS requires an annual report on Form 5500-SF if your 401 plan has $250,000 or more in assets at the end of a given year.

If you need help managing the funds in your solo 401, robo-advisor Blooom will manage your 401 at your existing provider. If you want even more comprehensive financial help, you might opt for an online planning service. Companies such as Facet Wealth and Personal Capital offer low-cost access to human advisors and provide holistic guidance on your finances, including how to invest your 401.

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