If you’re a small business owner, you may be happy to learn that, after teasing us for awhile, Vanguard has finally launched its Individual 401k.  There are a couple of compelling characteristics of the plan.

As with most Vanguard product offerings, the fees are extremely reasonable.

• There is no setup fee for your business.
  • For each Vanguard fund in which you invest, the annual account fee is $20.
  • Expense ratios are generally very low for Vanguard funds.  The average across all of their funds is .2%.
  • Depending on the fund, there may be a transaction fee, but these are easily avoided.

• There are three ways to contribute to the account.
  • The employee can contribute on a pre-tax basis.
  • The employer can contribute or match on a tax-deductible basis.
  • The employee can contribute to a Roth account on a post-tax basis.  This allows funds to be withdrawn in retirement with no additional tax applied.

Keep in mind that this is really designed for self-employed individuals, typically sole proprietors and partnerships.  Business partners and spouses who work for the company are eligible, but this account is not available for firms with other employees.