Vanguard Solo 401k vs Self-Directed Solo 401k

When you compare the Vanguard Solo 401k to Self-Directed Solo 401k, the Vanguard Solo 401k does not measure up. Reason being, unlike the Vanguard Solo 401k, which comes with investment restrictions and Solo 401k loan restrictions, the Self-Directed Solo 401k is quite liberal.

For example, with a Self-Directed Solo 401k you immediately gain access to the following:

Checkbook Control Solo 401k

Unlike the Vanguard Solo 401k, the Self-Directed Solo 401k comes with Solo 401k checkbook control option, putting you, as the trustee of the Solo 401k, in control of funding alternative investments (e.g., real estate, notes, metals, etc.) by conveniently writing checks or by wire.

Solo 401k Participant Loan

One of the greatest differences between the Vanguard Solo 401k and the self-directed solo 401k is the 401k participant loan feature. While the 401k rules allow for the participant to borrow from his or her 401k plan, Vanguard has decided to not offer a solo 401k plan with a participant loan feature.

On the other hand, a self-directed solo 401k offered by a third-party plan provider does allow for solo 401k participant loans.

Solo 401k Alternative Investments

The Vanguard Solo 401k only allows for investing in equities (e.g., stocks and mutual funds). However, the Self-Directed Solo 401k allows for investing in all investments allowed under the IRC regulations, such as real estate, private placements, trust deeds, precious metals (e.g., gold Solo 401k and precious metals Solo 401k), life settlements, currency trading, stocks, mutual funds, annuities, life insurance, etc.

Flat Annual Solo 401k Fee

While the Vanguard Solo 401k may seem to come with no fees, a closer review may uncover high fees. The fees associated with the Vanguard Solo 401k are usually subtracted from the equities’ underlying unit value or price per share. With a Self-Directed Solo 401k, the fees are not only low but also disclosed up front.

Voluntary After-Tax Solo 401k Contributions

The Vanguard solo 401k plan does not allow for voluntary after-tax solo 401k contributions, whereas the self-directed solo 401k does allow this type of contributions. To learn more about each contribution type that may be made to a self-directed solo 401k, VISIT HERE.

Incoming Rollovers

The Vanguard solo 401k does not allow for incoming rollovers from IRAs. The self-directed solo 401k does allow for rollovers from IRAs and former employer plans which is ideal for those who want to use the solo 401k to consolidate their retirement funds. Find out more HERE.

Pooled Account QUESTION:

Where can we set up brokerage accounts under your solo 401k plan? Is Vanguard a possibility? I understand we would set up three accounts: (i) tax deferred, (ii) roth, (iii) after-tax non-roth. Is that correct?


You are correct that three separate subaccounts will need to be established. We will handle the account set up at the brokerage firm of your choice. While a number of brokerage firms will open up these accounts (e.g. Fidelity, Schwab, etc.), Vanguard is not an option as there account set up requires pooled accounts (i.e. all the funds are deposited into a single account) & the pooled account set up is not compatible as the different fund sources need to be held in separate accounts.

Restate Existing Vanguard Solo 401k Plan QUESTION:

My spouse has an existing solo 401k plan with Vanguard.
So we’d like to “swap out” her old 401k plan with a new self-directed solo 401k plan. How should that be done?


We certainly have a large number of clients who have an existing Solo 401k plan through another provider such as T. Rowe Price, Fidelity, Schwab, Vanguard etc. and then “port” their Solo 401k over to our plan because our plan offers certain features not available under their plan such as 401k participant loanscheckbook controlRoth Solo 401kMega Back Door Roth, and the ability to invest in alternative investments such as real estatepromissory notes and precious metals.  The process to move your Solo 401k plan over is called a restatement.  While the plan would continue, the account at Vanguard would need to be closed and the assets transferred to an account at another company (e.g. bank, credit union or another brokerage such as Fidelity or Schwab).  If you go the brokerage route,  we would set up a brokerage account for you Solo 401k as part of our services.  This brokerage firm would not charge anything to establish or maintain the account and many of the firms that we work with (e.g. Fidelity and Schwab) provide a free checkbook which can facilitate your alternative investments.  See more at the following link:  Fidelity Brokerage Account.  Is the value of the existing acocunt more than $250,000? If so, have you been filing the required annual Form 5500-ez filing? Please note that we handle this filing requirement as part of our services for no additional charge.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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