5 Individual 401(k) Providers Compared

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Are you a physical therapist or occupational therapist who earns income from self-employment work?

It doesn’t matter if this self-employment work is your primary income or income from a physical therapy side hustle, like working for Luna On Demand Physical Therapy, or income from an occupational therapy side hustle

In any of these cases, you should consider opening an individual 401(k) to save and invest for your eventual retirement.

The scope of this article is not to cover the benefits that an individual 401(k) can provide, since that was already covered in The Individual 401(k) For Self-Employed Physical Therapists And Occupational Therapists

Be sure to give that article a read if you haven’t done so already in order to get the foundational knowledge you’ll want to better understand what this article will cover. Afterwards, you’ll be ready to open your own individual 401(k). But you’ll want to know which company, or provider, you should choose.

This article will help you answer that question by comparing and contrasting important features of five commonly used providers.

All of the information covered in this article was either gathered from each provider’s website or from phone conversations with representatives from each provider.  

Let’s get started.

E*TRADE

I’m sure E*TRADE was not the first name that came to mind when considering where to open your individual 401(k) account.

Nevertheless, it’s individual 401(k) has some surprisingly impressive characteristics.

And even though E*TRADE was taken over by Morgan Stanley back in 2020, these offerings haven’t changed.

Roth Option

E*TRADE offers both Traditional and Roth contribution options for their individual 401(k).

Transfer/Rollover Option 

Since E*TRADE offers both the traditional and Roth options, it makes sense that they also allow rollovers for all pre-tax accounts into the traditional individual 401(k) and post-tax accounts into a Roth individual 401(k).

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E*TRADE also has a special offer for those of you looking to rollover an account into your E*TRADE individual 401(k).

If you sign up using code BONUS22 and fund your new E*TRADE individual 401(k) account by transferring funds from a non-E*TRADE account within 60 days of account opening, then E*TRADE will award you a cash credit according to the table below:

  • If you deposit anywhere between $5,000-$19,999 then you get a cash credit of $50
  • If you deposit anywhere between $20,000-$49,999 then you get a cash credit of $100
  • If you deposit anywhere between $50,000-$99,999 then you get a cash credit of $200
  • If you deposit anywhere between $100,000-$199,999 then you get a cash credit of $300
  • If you deposit anywhere between $200,000-$499,999 then you get a cash credit of $600
  • If you deposit anywhere between $500,000-$999,999 then you get a cash credit of $1,200
  • If you deposit anywhere between $1,000,000-$1,499,999 then you get a cash credit of $2,500
  • If you deposit anywhere between $1,500,000 or more then you get a cash credit of $3,500

Fees

E*TRADE has the following account fee structure:

  • $0 account open fee
  • $0 monthly service fees
  • $0 account maintenance fee 

Minimum Required Balance

No minimum balance required.

Investment Options

E*TRADE charges $0 commission to trade stocks, ETFs, and no-load mutual funds online  including funds from Vanguard.

Other mutual funds cost $19.99 per trade, but E*TRADE will inform you if there will be a fee prior to you making a purchase. 

They also do not support the ability to purchase partial shares of ETFs.

Loans

E*TRADE will allow you to take out a loan on you individual 401(k)

Making Contributions

E*TRADE will allow you to make automated deposits from your bank account into your individual 401(k).

You can also write a check and take a picture of it using the E*TRADE app.

Otherwise, E*TRADE will need you to either wire each of your deposits or mail them a check.

Summary on E*TRADE

E*TRADE really pleasantly surprised me.

They offer the Roth option. They allow rollovers from both pre-tax and post-tax accounts and they will even give you money for doing so. They will allow you to take a loan out on your individual 401(k) should you need to. They do not charge a commission on stocks, ETFs, or no-load mutual funds including funds from Vanguard. Best of all, they support the ability to make automated deposits taken directly from your bank account. I love automating – the less you have on your plate, the more time you have to allocate to what matters to you in life.

The one negative I would point out is that E*TRADE will charge you a $19.99 commission to trade mutual funds that are not no-load funds. That’s why I recommend taking a closer look at ow E*TRADE categories any mutual funds you plan on investing in – if any of those funds come with a $19.99 commission per trade, I would consider choosing either a different investment that will fall in the $0 commission category or choosing a different individual 401(k) provider altogether. 

TD Ameritrade

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When I first started learning about what TD Ameritrade had to offer for their individual 401(k), I was initially pretty excited.

However, something you might not know about TD Ameritrade is that it was acquired by Charles Schwab. The representative I spoke with on the phone informed me that TD Ameritrade accounts will become Schwab accounts probably in about 1-1.5 years.

This will now bring about some important changes to TD Ameritrade, which we’ll discuss in more detail below.

Roth Option

With the Schwab acquisition of TD Ameritrade, Roth contributions will no longer be accepted to TD Ameritrade’s individual 401(k) beginning December 1, 2022.

Transfer/Rollover Option

TD Ameritrade does allow rollovers from pretax accounts including from a 401(k), 403(b), 457, and IRA. 

However, since TD Ameritrade will no longer be offering the Roth option, they also no longer allow rollovers from post-tax accounts such as a Roth 401(k) or Roth IRA.

Fees

TD Ameritrade has the following account fee structure:

  • $0 account open fee 
  • $0 monthly service fees
  • $0 account maintenance fee

Minimum Required Balance

No minimum balance required.

Investment Options 

TD Ameritrade charges $0 commission fees for online trading of stocks and ETFs. However, they do not support the ability to purchase partial shares of ETFs.

TD Ameritrade charges $0 commission to trade no-load mutual funds as long as it is held for at least 181 days. Other mutual funds cost a commission of either $49.95 or $79.95. before you make a purchase, TD Ameritrade will tell you if there will be a charge.

However, if you ask TD Ameritrade to help you set-up “Systematic Purchases” for automated deposits/purchases of the same mutual fund on a periodic basis, then they will waive the mutual fund commission after you make your first purchase.  

Loans

TD Ameritrade does not offer loans on their individual 401(k).

Making Contributions

TD Ameritrade will allow you to make automated deposits from your bank account into your individual 401(k), but you will need your bank to assist you in setting this up.

Otherwise, TD Ameritrade will need you to either wire each of your deposits or mail them a check.

Summary on TD Ameritrade

My favorite aspect of TD Ameritrade is that they will accommodate automated ACH electronic fund transfers as long as your bank will too. It’s too bad they won’t allow you to purchase partial shares of ETFs, though. This could leave you with some of your deposit not being invested.

You can choose to purchase mutual funds instead. If you do, I appreciate that they have no-load funds that are commission free. And although they have pretty steep commission fees to invest in the no-load funds from Vanguard and Fidelity, you can have these fees waived. 

All of that said, a big disappoint is that TD Ameritrade does not offer a Roth option for their individual 401(k). They don’t even allow you to take out a loan on your individual 401(k). 

Schwab

Speaking of the Schwab acquisition of TD Ameritrade, how about we cover Schwab next?

Yes, even though Schwab acquired TD Ameritrade, Schwab still offers its own individual 401(k) option.

Let’s take a closer look at how it stacks up.

Roth Option

Schwab does not offer the Roth option for their individual 401(k).

Transfer/Rollover Option

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Schwab will allow rollovers from pre-tax accounts. 

However, since Schwab does not offer a Roth individual 401(k) option, Schwab does not allow you to rollover a Roth 401(k) or Roth IRA into a Schwab individual 401(k).

Fees

Schwab has the following account fee structure:

  • $0 account open fee 
  • $0 monthly service fees
  • $0 account maintenance fee

Minimum Required Balance

No minimum balance required. 

Investment Options

Schwab charges $0 commission fees for online trading of stocks and ETFs. Trades made by phone cost $5 per trade and broker-assisted trades cost $25 per trade.

It costs $0 in commissions to trade no-load mutual funds, but you will likely be charged a fee of $49.95 if the fund is from what they deem to be a competitor (eg Vanguard or Fidelity). You will also be charged this $49.95 fee if the mutual fund is not no-load.

Loans

Schwab does not allow you to take out a loan on you individual 401(k)

Making Contributions

Schwab requires that contributions be made by either wiring money from your bank, transferring money electronically from another Schwab non-retirement account, or by sending a check in the mail.

Schwab does not allow ACH electronic fund transfers.

Summary on Schwab

Unfortunately, Schwab left a lot to be desired.

They do not have the Roth option, they do not allow ACH electronic fund transfers, and they will likely charge a hefty $49.95 fee to invest in Vanguard or Fidelity mutual funds each time you make a trade. Can you imagine wiring a deposit of say $300 each month, a portion of which will go to paying the fee for wiring the funds and $49.95 of which will go to Schwab if you chose to invest in a Vanguard or Fidelity mutual fund?

If you go with Schwab, your best bet would probably be to invest in Schwab funds to avoid the $49.95 fee, but even then you can’t automate your deposits so you will be adding another item to your probably already long Do To List as a self-employed physical therapist or occupational therapist. 

Fidelity 

Alright, now we’re moving on to two of the most recognizable and trusted stalwarts of the financial industry.

Of these two, we’ll start with Fidelity.

Roth Option

Fidelity does not offer the Roth option for their individual 401(k).

Transfer/Rollover Option

Fidelity will allow rollovers from pre-tax accounts. 

However, since Fidelity does not offer a Roth individual 401(k) option, Fidelity does not allow you to rollover post-tax accounts into a Fidelity individual 401(k). 

Fees

Fidelity has the following account fee structure:

  • $0 account open fee 
  • $0 monthly service fees
  • $0 account maintenance fee

Minimum Required Balance

No minimum balance required. 

Investment Options

Fidelity charges $0 commission fees for trading of stocks, ETFs or mutual funds. 

However, you do not get access to Fidelity ZERO Funds, which are funds with a zero expense ratio.

Loans

Fidelity does not allow you to take out a loan on your individual 401(k).

Making Contributions

Fidelity requires that contributions be made by having money taken out from your paycheck, either wiring money from your bank, transferring money electronically from another Fidelity non-retirement account, or by sending a check in the mail.

Fidelity does not allow ACH electronic fund transfers.

Summary on Fidelity

I have to be honest, I was disappointed with what Fidelity had to offer.

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No Roth option.

No ACH electronic fund transfers from your bank account.

No ability to take out a loan against your individual 401(k) balance.

No access to Fidelity’s highly touted ZERO Funds with no expense ratios.

On the bright side, you do still get access to many other Fidelity funds with low expense ratios, but if I’m going to open a retirement account with a provider and continuously invest in it for decades, at least give me access to the ZERO Funds. . .

Vanguard

Alright, the moment you’ve probably been waiting for, probably the most trusted and recognizable name covered in this article: Vanguard.

Since Vanguard is widely respected for their founder John Bogle’s philosophy on simple, low-cost investing, I was hoping to be blown away by what they offer for their individual 401(k).

Let’s see if they live up to the hype.

Roth Option 

Vanguard offers both Traditional and Roth options for their individual 401(k).

Transfer/Rollover Option

Vanguard allows you to rollover pre-tax accounts to your Vanguard individual 401(k).

However, Vanguard does not allow you to rollover Roth IRA into your Vanguard Roth individual 401(k). They do allow you to rollover a Roth individual 401(k) into your Vanguard Roth individual 401(k), though.

Fees 

Vanguard doesn’t charge a fee to open the individual 401(k) account. 

However, they do charge $20 per fund per year for each fund you hold in your Vanguard individual 401(k). This fee can be waived if you have at least $50,000 in your Vanguard individual 401(k).

Minimum Required Balance

Some funds require a minimum investment. 

Vanguard will waive this minimum investment when investing in a Vanguard individual 401(k) if the minimum investment required is $3,000 or less.

Investment Options

Vanguard does not allow you to invest in any stocks or ETFs – you can only invest in Vanguard’s no-load mutual funds which cost $0 in commissions to trade

You do get access to Vanguard’s Admiral shares. Typically, in order to have the option of investing in an Admiral share fund, you must invest a minimum amount. However, as covered in the Minimum Required Balance section above, this minimum required amount is waived if the minimum required amount falls in the range of $0-$3,000 since you are investing in your Vanguard individual 401(k).

Loans

Vanguard does not allow you to take out a loan on your individual 401(k).

Making Contributions

Vanguard does allow ACH electronic fund transfers (linking your bank account to your Vanguard individual 401(k)) to make individual 401(k) contributions. However, these cannot be automated. 

The only other way to make a contribution would be by mailing a check. 

Summary on Vanguard

Lots of surprises with Vanguard.

While I appreciate how Vanguard has the Roth option, I was baffled that they don’t allow rollovers from Roth IRAs. 

I was even more taken aback by the annual $20 per fund charge. Yes, this fee can be waived if you have enough funds invested, but Vanguard is a company built on a reputation of low fees and they are the only company in this article that has this fee. Strange.

You do get access to Vanguard’s highly touted Admiral Shares, which after reviewing how Fidelity doesn’t allow access to their ZERO Funds, so I appreciate this. But again, I was surprised that you can’t invest in any stocks or ETFs.

Lastly, while Vanguard does accommodate ACH electronic fund transfers, these contributions can’t be automated.

Overall Final Verdict

Overall, I was really pleasantly surprised with what E*TRADE had to offer, which is why I decided to open my individual 401(k) account with them.

Comparing Individual 401k Providers

Of the providers covered in this article, only E*TRADE and Vanguard allow the Roth option. If you happen to have a Roth IRA, keep in mind that Vanguard does not allow you to rollover your Roth IRA but E*TRADE does. E*TRADE will also reward you with cash credit for rolling over at least $5,000.

E*TRADE had no account fees or minimum required balance. 

E*TRADE does not charge a commission to trade stocks, ETFs, and no-load mutual funds and they give you access to funds from Vanguard. If you stick to these funds, you can avoid their $19.99 per trade charge. 

E*TRADE also allows you to take out a loan on your individual 401(k). While I do not anticipate needing to do this, it is certainly nice to keep my options open.

Perhaps most importantly, E*TRADE also allows you to make automated, electronic ACH contributions so I won’t have to actively do this on a regular basis.

Now, there is another option you can consider that was not covered in this article: A self-directed Individual 401(k).

A Quick Word On Self-Directed Individual 401(k)s

A self-directed individual 401(k)s is an individual 401(k) that is located at a provider like those covered in this article but managed by another, third party company.

Having the third party company manage the individual 401(k) allows you to have more investment options such as cryptocurrency, real estate, and precious metals.

However, this comes with a cost – literally.

You will be paying more in account fees, which you noticed with most of the providers that were covered earlier were offered at $0.

You are also responsible for working with the third party you are using to prepare the necessary tax paperwork each year. 

If you are interested in opening a self-directed individual 401(k), some popular third party companies you can look into are My Solo 401(k)RocketDollar, and Ubiquity.  

But if you prefer to keep your costs low, have your tax paperwork managed for you, and don’t need less common options for investing your retirement funds, you can just stick to using one of the five providers we covered earlier. 

Final Thoughts. . .

So, what do you think? Do you have self-employment income? Do you have an individual 401(k)? If so, who is your provider?

Let me know your thoughts in the comments section below!

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