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Fidelity Investments for Mega Backdoor Roth solo 401k
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6 Replies
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You will need to open a solo 401k with a self-directed solo 401k provider as Fidelity’s solo 401k does not allow for voluntary after-tax contributions. However, Fidelity does provide brokerage accounts referred to as non-prototype or investment only for self-directed solo 401k plans provided by third-party providers.
Once you open the self-directed solo 401k, the new provider can assist you in opening the Fidelity non-prototype brokerage accounts, and you can subsequently convert the voluntary after-tax solo 401k funds to a Roth IRA or the Roth solo 401k.
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Thank you. I have another question.
Once I open the 3 brokerage accounts (before tax, roth and after tax) at Fidelity for my solo 401k plan and I then make the voluntary after-tax contribution and immediately convert it to the roth solo 401k plan, can I also use the same Roth solo 401k brokerage account to make new Roth solo 401k contributions in future years?
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Good question! The Mega Backdoor Roth Fidelity account setup is one of the most popular use cases for our clients!
You can certainly use the same account to make Roth contributions (e.g. up to $19,500 or even $26,000 for 2021).
I note that one of the top reasons that our clients set up Solo 401k plans with us is the ability to make Mega Backdoor Roth Solo 401k contributions (for 2021 up $58k or even $64.5k if you are 50 or older) and Fidelity is one of the top options for opening the accounts.
For solo 401k clients who wish to hold their Solo 401k funds in Fidelity brokerage accounts, we will prepare the paperwork to open a free brokerage account at Fidelity.
Many clients like Fidelity because of the wide range of options that are available through Fidelity such as mutual funds, ETFs, stocks, etc. as well as the ability to invest in alternative investments such as real estate, crypto, etc. since the account is governed by our IRS-approved plan documents which allow for such investments (in fact, the Fidelity account even comes with a free checkbook).
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This page is excellent:
But is the following a mistake?
Select the box titled “Fidelity IRA, Roth IRA, or Fidelity Retirement plan…”
Should it be this?
Select the box titled “Fidelity Investment-Only Account (formerly known as a Non-Prototype account).”
I believe the reason we can move from After Tax to Roth is because the plan is setup for Fidelity to create Non-Prototype sub-accounts (that they now call Investment-Only Accounts).
Anyway, they can probably tell from the Account number, even if the wrong box was checked… but making sure I did this correctly or to point a possible error on the instructions page (which is much appreciated a visual for how to do this!).
