I have a solo 401k for over 10 years. I had to stop working in the line of business I was doing and start in a different business. My question is do I need to start a new 401k and roll the old one into it or just keep the old one and if so do I need to amend the old one?

  • I would ask the place where you setup the solo 401k. – tomjedrz Apr 27 '16 at 3:57
  • Quick note: before rolling one 401k into another, make sure you understand how doing so resets the clock on the Rule Of 55. – keshlam Jun 15 '16 at 4:21

If you plan to continue contributing to a 401(k) and are no longer self-employed, then you need to start a new 401(k) at your new business. You can't contribute to the old one any more.

About the money in the old one, you have a few options.

  • You can just leave your current money in your old solo 401(k). Nothing stopping you from having multiple 401(k) accounts.
  • You can roll your old 401(k) into a traditional IRA at some place like Scottrade or Vanguard.
  • An option you may have is to roll the funds from your old 401(k) into your new one. This is permitted by the IRS but your new 401(k) plan must also permit it. Normally, they do. But you should check with them to make sure. This transfer is normally initiated from your new 401(k).

If both 401(k) plans have good investment options and low fees, then there's little reason to think one of these strategies is better than the other. If, like me, at least one of your 401(k) providers has very few available funds and those funds have high expense ratios, then it's a good idea to move your money where the investments are best. As a rule, IRA's are better than 401(k) plans because most IRA's will allow you to invest in practically anything you want while most 401(k) plans only allow you to invest in the funds that have taken your company's HR people to the best lobster dinners or went to the same school as them. Most organizations do an absolutely horrible job at selecting a reasonable set of funds because the decision-makers generally have no finance background and no incentive to do a good job. For that reason I like IRA's.

Of course, some solo 401(k) plans are also very good so just leaving it where it is may be best for you. This has the added advantage of being ready to go if you end up self-employed again at some point.

  • Note that rolling over a 401k resets the "rule of 55" on those funds, which may mean a longer delay before you can access that money without penalties. Make sure you understand this before doing so. It may not matter for you, but for those if us who are middle-aged or later it can be important. – keshlam Jul 18 '16 at 12:59

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