This guide conducts a comprehensive analysis of the Fidelity Solo 401k plan, also known as the Fidelity Self-Employed 401k plan, the Fidelity Self-Directed 401k, Fidelity Individual 401k, or the Solo 401k Fidelity plan.
Self-employment, small businesses, and freelancing are always close to my heart. Although I do have my day job as a business consultant in an engineering firm, my heart and soul lie in creating my own small business. This website is one endeavor in that direction. However, to sustain a small business, its taxes and finances need to be in place.
One topic of considerable importance is the retirement of self-employed and freelance individuals. As I have mentioned in my earlier posts, a solo 401k is an efficient plan to stash retirement wealth for self employed individuals.
A solo 401k apart from tax benefits, allows you to stash the maximum contributions in your retirement plan. This is because you can contribute both as an employee and as an employer in a solo 401k (read solo 401k contribution limits).
But often, we get stuck on the decision of which provider to choose for a solo 401(k). One trusted and dependable brand for a solo 401(k) is Fidelity.
Fidelity stands out as one such trusted partner, boasting a legacy of over 75 years, catering to more than 43 million individual investors, and managing assets totaling $11.7 trillion (as of June 30, 2023).
In this guide, we will take a close look at the Fidelity Solo 401(k) plan from all angles. This will include how to set up a Fidelity Solo 401(k) account, available investment options, eligibility for the plan, the user experience of the Fidelity plan, Roth option availability, participant loan availability, fees, and rollover
Keep reading 🙂
Read here for Best Solo 401k providers
Table of Contents
Fidelity Solo 401k: A Complete Analysis
|Investment Options||Mutual funds, stocks, bonds, ETFs, bonds, CDs and over 3400 mutual funds.|
|Eligibility||Freelancers or business owners, with no employees (except the spouse who can be treated as an employee).|
|Roth Plan||Not available|
|Rollover||Yes, most of your previous retirement plans can be rolled over or transferred to the Fidelity Solo 401k plan.|
|Loan option||Not available|
|Fees||Zero fees charged. Fees can be charged for consultations.|
|How to make contributions||You can make contributions to the Fidelity Solo 401k plan by signing and mailing a check to Fidelity. Please check below for details.|
|Withdrawals||No penalty-free withdrawals before age 59.5, disability, or death.|
For a more detailed analysis, please read below.
Fidelity Solo 401k: Investment options
- A wide range of mutual funds, stocks, bonds, ETFs, and more.
- Options to invest in stocks, ETFs, options, bonds, CDs and over 3400 mutual funds.
- It also includes 4 index funds with zero expense ratio and no minimum investments.
The user experience of the platform
Fidelity has been in the business for a long time (over 70 years) with a wide range of investment options. It is the platform of choice for most of the investors.
Fidelity Solo 401k: Eligibility Requirements
To be eligible for the Fidelity Solo 401k plan, you should be either a business owner with no employees, or a freelancer, or a business owner with only your spouse as your employee, or an owner of a business where there are only partners and no employees.
Fidelity Roth Solo 401k
When I checked with Fidelity, they confirmed that at this point, they do not offer a Roth option for solo 401k retirement accounts.
Currently, they only offer traditional IRA (pre-tax contributions).
Hence, a Fidelity Solo Roth 401k or Fidelity Roth Solo 401k or Fidelity Solo 401k Roth does not exist till now at the time of writing this guide.
However, if you choose a self-directed solo 401k provider such as My Solo 401k and open a brokerage account with Fidelity, you can take advantage of the Roth option as well. In this scenario, you can also explore other benefits like investing in alternative assets (such as real estate, tax liens, cryptocurrencies, etc.), having access to participant loans, and more.
Fidelity Solo 401k rollover
If you already have a retirement savings account like SEP, or employer 401k, it can be rolled over or transferred to the Fidelity Solo 401k.
It is suggested you consult your financial advisor or a Fidelity consultant at 800-544-5373 to get help.
Rollover is allowed for the following:
- Profit Sharing, Money Purchase, and 401(k) plans
- SEP IRAs and SARSEPs
- SIMPLE IRA accounts after two years of SIMPLE participation
- 403(b) and governmental 457(b) plans
- Traditional IRAs
Fidelity Solo 401k loan
The Fidelity solo 401k does not entitle you to take a loan against the plan.
As mentioned above, if you choose a self-directed solo 401k provider such as My Solo 401k and open a brokerage account with Fidelity, you can take advantage of the Roth option as well. In this scenario, you can also explore other benefits like investing in alternative assets (such as real estate, tax liens, cryptocurrencies, etc.), having access to participant loans, and more.
Please note that the Fidelity 401k plan (employer-sponsored) entitles you to take a loan against your plan.
Just to state, a loan is a better idea, than withdrawing some amount out of your 401k savings, to address your urgent needs.
A loan does not remove the amount from your 401k savings. In some time, you pay back the loan amount with interest to yourself, which is added to your 401k savings.
However, if you withdraw funds, it is permanently removed from the 401k savings. Besides, tax is also levied on the funds withdrawn. Furthermore, a 10% penalty is also charged in most cases (other than few exceptions).
Fidelity Solo 401k fees
|Account Maintenance Fee||Minimum Opening Fee||Commission||Support and assistance|
|Zero||Zero||Zero||May incur some fee depending on the support required from Fidelity consultants.|
Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs), and commissions, interest charges, and other expenses for transactions, may still apply. See Fidelity.com/commissions for further details.
Fidelity Solo 401k mega backdoor Roth
The question is, does Fidelity solo 401k plan allow mega backdoor Roth?
The answer is “No”. The Fidelity solo 401k plan does not allow a mega backdoor Roth option, where you can make after-tax contributions and convert your plan to a Roth IRA or Roth 401k.
In order to employ the mega backdoor Roth strategy for more savings, you can open an account with My Solo 401k.
My Solo 401k is a self-directed solo 401k provider, which will open your account with Fidelity as your brokerage account.
Now here, you can make a mega backdoor Roth contribution.
The mega backdoor Roth is a strategy to make larger contributions in your retirement plan. It is for those people who earn too much to contribute to a Roth plan.
For instance a single taxpayer who earns $153,000 or more, or a married filing jointly taxpayer who earns $228,000 or more, are not eligible to contribute into a Roth IRA or Roth 401k plan in 2023.
For these categories of taxpayers, the mega backdoor Roth is a strategy to make Roth contributions.
How to contribute to Fidelity Solo 401k
You can make contributions to the Fidelity Solo 401k plan by signing and mailing a check to Fidelity.
Check is payable to Fidelity Investments.
Include your account number in the memo section of the check.
Include a 401(k) Contribution Remittance Form along with your check.
Address for mailing the check:
PO Box 770001
Cincinnati, OH 45277-0003
Fidelity Solo 401k Contribution Form
As mentioned above, in order to make a contribution to your solo 401k plan, you need to include a Contribution Form.
The Fidelity solo 401k Contribution Form can be found here.
How to open a Solo 401k Fidelity?
It is free to set up and has no annual fees associated.
Please note that you can always speak to a Fidelity representative at (800) 544-5373.
Step 1: Get your Employee Identification Number (EIN)
In order to open your Fidelity Solo 401k account, you will need to furnish your Employee Identification Number (EIN). You can get your EIN from the IRS website here.
You can follow the instructions on the website to get your EIN.
Make sure to note down or download the EIN number and save it at a safe place. I believe it is pretty tough to regain your EIN, so better to write and save it at a safe place.
Step 2: Register and log in to your Fidelity account.
Click on this link.
Fill in the details requested (like name, email id).
This will navigate you ot the Login Page as shown below.
Enter your email address and click on “LOGIN”.
A 6-digit code will be sent to the email id you shared. Enter the 6 digit code to navigate to the CUSTOMER VAULT PAGE.
Step 3: Open the Self-Employed 401k online pdf document
You are now navigated to the Customer Vault page as shown below.
Click on “Upload Self Employed 401(k) Forms”.
It will take you to the below page.
Click on ! sign as pointed in the above image.
Clicking on the ! sign will take you to the DocuSign online signing service to complete your online signatures on the required documents needed to open your fidelity solo 401k account. You should read all the details before signing.
You can read the Fidelity Retirement Plan Customer Agreement and Important Disclosures, which contains documents that govern your account, including the customer agreement and information concerning privacy, fees, commissions, and your core position.
Click on “Proceed”.
Step 4: Read, fill in and sign the required forms using Docu Sign
Now all the Fidelity Solo 401k plan documents that need to be filled in and signed are opened through DocuSign. (DocuSign is an organization that manages electronic signatures.)
The DocuSign will open the documents in the below given order (generally):
- Agreement Instructions
- Agreement for Solo 401k plan
- Trust Agreement
- Fidelity Self-Employed 401k plan form
- Trusted Contact Authorization form
On the left side of the page, you will find “START” and “SIGN” prompts, which allow you to progress through the process of filling in and signing the documents.
Please read the first section, “Plan Information,” to gather all the basic information required for filling out the forms.
A detailed explanation of the form is given below:
- Agreement Instructions-Self-Employed 401k Adoption Agreement Instructions
It will mention all the details you need to fill in the Fidelity Solo 401k Adoption Agreement.
- Agreement No.1
In this form, you will fill in details like “Plan Information”, “Employer”, “Coverage”, “Compensation” and more. Check a snapshot below.
- Trust Agreement
This is to establish a Trust Agreement with Fidelity Brokerage Services LLC, that makes Fidelity to become your Trustee to hold and invest your assets in permissible investments.
- Form for Fidelity Solo 401k & Fidelity Profit Sharing Plan & Fidelity Money Purchase Plan Account.
Since you want to open a Fidelity Solo 401k or Fidelity Self-Employed 401k plan, select the option “Establish a new SE 401(k) Plan account”.
- The last form to fill in, is the “Trusted Contact Authorization Form”.
This form is to name your trusted contact or beneficiary, to whom Fidelity can contact in cases of your diminished activity, or when Fidelity is not getting any response from you. Although, generally the trusted account does not have any transaction rights in your account.
Once you fill in and sign all the above forms, click “FINISH”. Save the pdf and send it to the address shown at the bottom of the pdf.
Although, I have pasted the addresses below, do check them in the pdf, before sending your form.
PO Box 770001
Cincinnati, OH 45277-0002
100 Crosby Parkway KC1K
Covington, KY 41015
Fidelity Solo 401k: Withdrawals
Penalty free withdrawals are only allowed, if one of the following triggers or events occur:
- You turn 59.5 years of age
- A disability occurs
- Death happens
In all other cases, withdrawals are entrusted with a 10% early distribution fine.
Fidelity Solo 401k-Pros and Cons
- Zero trading fee, zero opening and closing fee, and zero maintenance fee.
- A broad list of financial products to invest in like stocks, mutual funds, ETFs, bonds, etc. with zero trading fee
- A large pool of educational resources to help you along the investment process.
- No opening and closing fee, monthly or annual maintenance fee and trading fee.
- Does not offer Roth 401k and 401k loans.
- No option for electronic transfer for the deposit of funds
- The trading facilities provided are not that apt for some active traders
Fidelity Solo 401k-Security and Insurance
Fidelity Investments takes security as a top priority. Some of the security measures implemented by Fidelity Investments include:
- Two-factor authentication: Fidelity investments require two-factor authentication for logging into your account. In addition to the password, a security code via text or call on your registered number is required to log in to your account.
- Encryption: Your personal and financial information is well encrypted when it is transmitted over the internet.
- Firewalls and intrusion detection protect the network from unauthorized and malicious attacks.
- Regular security updates and patches: Fidelity regularly updates and patches their systems to ensure that the latest security vulnerabilities are addressed.
- Account monitoring for security alerts: Fidelity monitors clients’ accounts for suspicious activity and will notify clients if they detect any unusual activity. Please ensure your contact information is up to date with Fidelity.
- Insurance protection: Fidelity is a member of the Securities Investor Protection Corporation (SIPC), which provides insurance protection for clients’ securities and cash in the event of a broker-dealer’s failure.
Fidelity Solo 401k comparison with other Solo 401k providers
|Best Solo 401k providers||Investment options available||Fees||Loan||Rollover||Roth option available (Yes/No)||Mobile application (Yes/No)|
|Fidelity||A wide range of mutual funds, stocks, bonds, ETFs, and more.||Zero||No||Yes||No||Yes|
|Charles Schwab||Mutual funds (thousand of options), ETFs, stocks, bonds, and cash equivalent options like money market funds.||Zero||No||Yes||No||Yes|
|Vanguard||Hundreds of Vanguard mutual funds , mutual funds from other companies, ETFs, stocks, CDs and bonds.||$20 annually for each account held||No||Yes||Yes||Yes|
|E*Trade||Over 4,400 mutual funds, options, futures, and fixed-income bonds and CDs.||Zero||Yes||Yes||Yes||Yes|
|TD Ameritrade||Stocks, options (if approved), mutual funds, exchange-traded funds (ETFs), bonds, and CDs||Zero||No||Yes||No||Yes|
We analyzed the Fidelity Solo 401k plan features one by one ranging from the investment options available, availability of Roth, availability of loans, fees, and rollover, and finally saw how to contribute to the fidelity solo 401k plan.
Fidelity offers a decent package in its solo 401k plan for self-employed individuals. However it does not offer Roth contributions (for tax-free withdrawals), nor does it offer loans against your solo 401k plan.