I am trying to help a physician friend get his investing house in order (He bought WCI’s book at least!). He is already doing a lot of things right on a macro level (no debt, lives below means etc) but there’s also room for improvement. One area I think he could possibly benefit is that he does not have a ROTH account and was unaware of the ability to do Backdoor ROTH contributions. The challenge is that he has multiple retirement accounts that may affect his ability to do backdoor conversions without tax penalties.
The scenario:
MFJ, age 43, his income ~$400k W-2, $50k 1099. Wife ~$60k W-2, no benefits bc part time so not eligible for 401k contributions
Accounts: Employer 403(b), contributes max yearly. SEP-IRA funded with his IC income, ~$200k balance. Traditional IRA opened as a resident, ~$40k balance (unknown how much of that is growth vs contributions, assume contributions were deductible).
Assuming he opens a SOLO401(k) for 2018, rolls over the SEP IRA balance into that and only contributes to the SOLO 401(k) going forward, what is the best way to deal with his TIRA? It looks like it’s not possible to convert his TIRA without paying taxes because there are deductible contributions. Does he need to wait until 2019 to do a Roth conversion on the TIRA to avoid paying pro-rata on the SEP balance as well, or if he converts the SEP before 4/15/18 will he be able to claim that conversion happened in 2017, allowing him to do a Roth conversion in 2018? Help is much appreciated.
The scenario:
MFJ, age 43, his income ~$400k W-2, $50k 1099. Wife ~$60k W-2, no benefits bc part time so not eligible for 401k contributions
Accounts: Employer 403(b), contributes max yearly. SEP-IRA funded with his IC income, ~$200k balance. Traditional IRA opened as a resident, ~$40k balance (unknown how much of that is growth vs contributions, assume contributions were deductible).
Assuming he opens a SOLO401(k) for 2018, rolls over the SEP IRA balance into that and only contributes to the SOLO 401(k) going forward, what is the best way to deal with his TIRA? It looks like it’s not possible to convert his TIRA without paying taxes because there are deductible contributions. Does he need to wait until 2019 to do a Roth conversion on the TIRA to avoid paying pro-rata on the SEP balance as well, or if he converts the SEP before 4/15/18 will he be able to claim that conversion happened in 2017, allowing him to do a Roth conversion in 2018? Help is much appreciated.
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