Best Solo 401(k) Plan for You: Self or Fully Administered?

By Stuart Robertson

Best Solo 401(k) Plan for You: Self or Fully Administered?

If you’re self-employed or have an owner-only business, you too can set up a 401(k) plan. It’s called a Solo 401(k) and it enables any owner-only business without employees to take full advantage of the high contribution limits and tax savings a 401(k) plan offers. In fact, you can shelter up to $69,000 from taxes in 2024 – $76,500K if you are 50+ years of age. That’s some pretty powerful savings and might even drop you a tax bracket.

Once you know you want to start a Solo 401(k), there is an important decision to make. Which Solo 401(k) solution best fits your needs? There are two core solutions for individual 401(k) plans:

  1. Self-administered 401(k) plan

  2. Fully administered 401(k) plan

Self-administered 401(k) plans:

A self-administered 401(k) typically has a lower setup price versus a fully administered plan, and a much lower monthly or quarterly account service charge. However, it will have fewer features as it won’t likely enable a 401(k) loan, won’t allow for multiple owners and/or your spouse to participate, and may not include the Roth 401(k) option either.

Self-administered plan costs will be dependent on whether you want a curated fund line-up and/or model portfolios like a typical 401(k) plan (these benefit from experts bringing high-quality options from which you choose), or if you want the ability to use a self-directed brokerage window to pick stocks, bonds, or funds from the thousands of stock, bond, and funds available in the market. Typically, the latter can be a good fit for a sophisticated investor who has time to consider many investment options available, and the former is good for those that are too busy or are not investing pros.

If you prefer a self-directed brokerage window, there may be costs for adding funds or other brokerage or transaction fees for every trade you make. Self-administered 401(k) plans with a curated investment offering, as well as most fully administered plans, do not tend to have these costs as most are covered with either monthly account service and/or investment management charges.

Fully administered 401(k) plans:

The fully administered plan includes a plan administrator that makes it simpler to manage your contributions and stay within the employee and employer contribution limits for the year. Do know the administrator is not privy to your earnings to determine how much you can contribute as an employer. For 2024, $69,000 is the total 401(k) limit between employer and employee contributions. As an employer, your contribution amount is based on calculations that will typically be 20%-25% of your earnings. The employee contribution limit of $23,000 has no calculations to manage, you just need to ensure you don’t exceed it if your provider doesn’t provide guardrails.

A fully administered Solo 401(k) is generally easier to convert to a 401(k) plan that can accommodate employees if you plan on hiring employees at some point. Also, it is of importance to know in either scenario, you are both the employer and employee of your Solo 401(k), and as the employer you are responsible for managing how your plan is run.

Comparing Solo 401(k) Solutions

Features / Pricing Self-Administered Fully Administered
Supports multiple owners and/or spouse
No, unlikely
Roth 401(k) Option
Some do
Loan Option
Tax Form 5500 Preparation (required for $250K+ balanced)
Not included, $200+ fee typical if you use a tax specialist
Included, $0
Transaction Fees
Yes for if you use a self-directed broker window (per mutual fund or trading charge is common); No if a curated list or portfolios.
No, $0
$0 - $100 is common; if you have a 401(k) or IRA to roll in some may waive.
$150-$250 is common; if you have a 401(k) or IRA to roll in some may waive.
Monthly Administration or Account Service (may be charged annually or quarterly)
$0 to $10 is typical (money balances can drive to $0)
$0-$25 per owner (money balance helps lower)
Investment Options
Either a Large Selection or a Curated List depending on the provider
Typically, a curated list of 15-25 diversified funds, although some may support a self-directed brokerage window for an added fee.
User Experience
One digital experience/website to manage Employer and Employee contributions and the plan in general
Two websites – one for employee account and investment selection; one as employer to manage employer contributions and other owners/spouses that may be part of your 401(k) plan.

If you are self-employed for the foreseeable future and don’t need access to a 401(k) loan, a self-administered solo 401(k) can cost less to setup, be easier to manage, and offer a simpler digital experience.

If you expect to add employees in the next year, have multiple owners, or want to include your spouse, a fully administered plan is likely a better fit. Also, if you ever think you may need access to funds via a penalty-free 401(k) loan, a fully administered plan is the one for you.

Give us a call if you need help deciding. We offer both options.

Key Takeaways:

  • Solo 401(k) plans are available to self-employed and owner-only businesses and can include a spouse (or spouses, if there is more than one-owner of the company). These plans offer high contributions and tax advantages just like those for other businesses.

  • The company cannot have any employees to take advantage of a Solo 401(k) plan.

  • There are self-administered and fully administered Solo 401(k) solutions.

  • Self-administered plans tend to be lower cost in regard to setup and administration or account services but may have other transaction and funds costs. They also tend to have less guardrails and less features than a fully administered plan.

  • A fully administered Solo 401(k) can support multiple owners, 401(k) loans, and more.

  • If you are a sophisticated investor and prefer a self-directed brokerage window to invest in the broad array of market options, this is more common in self-administered solutions. self-administered 401(k) solutions may be best for you. If you are too busy or aren’t confident enough to choose your own investments, a fully administered plan may be the way to go.

This is not meant to be tax advice. ShareBuilder 401k does not offer tax or legal advice. Consult with your tax or legal advisor before engaging in specific strategies.

Meet the Author

Our low-cost 401k plans are easy to setup online and are supported by our 401k advisors and specialists. ShareBuilder 401k serves small business and medium-sized companies, as well as the self-employed. We offer Roth 401k, Safe Harbor 401k, Traditional 401k, and Solo 401k options. Your 401k plan is paired with investment management expertise and employee education to help you save more.