I am trying to determine the best way to get as much sheltered money into retirement accounts while still being tax efficient. I am in my final year of residency with 1099 income from a stipend as well as W2 from residency. I am eligible for a employee 401k starting with my job this fall. My wife and I have each maxed out Roth IRAs for the previous 4 years. I just realized while doing my taxes for 2016 that I am now considered self employed. I will actually have 1099 income for the next three years so I will remain self employed at least that long. I wish I would have realized this last year and started a i401k but alas, I did not. I plan to open a i401k for 2017, 2018, and 2019 and contribute the max I can based on my 1099 income while maxing out my 18k employee contribution to my employee 401k. I also plan to max and convert backdoor roths for both my wife and I each year for as long as they let us. My question is whether I should open a SEP IRA for 2016 to get extra money into a tax sheltered retirement account and also a tax break this year. My 1099 net income for 2016 is $30,099 (after tax and deductions) which would let me contribute 25% of that ($7525). My concern is the pro rata tax hit I will take in 2017 when I do my backdoor roth conversion. I think the benefits to doing the SEP IRA for 2016 potentially outweigh the tax hit but I wanted to see what your all thoughts were.
The Vanguard rep I just spoke to thought I should max my 2017 traditional IRAs and convert them prior to maxing my 2016 SEP IRA to simplify the conversion. The only issue with that is I don't have enough cash on hand right now to max both traditional IRAs and a SEP IRA before April, so assume I would need to file for an income tax extension for 2016, which seems like a hassle. Also, is there anyway to rollover my SEP IRA later this year (or next) to my employee 401k? That would take the tax hit out of the question.
I realize I just asked about 20 questions in one thread, sorry.
I very much appreciate any replies and help.
The Vanguard rep I just spoke to thought I should max my 2017 traditional IRAs and convert them prior to maxing my 2016 SEP IRA to simplify the conversion. The only issue with that is I don't have enough cash on hand right now to max both traditional IRAs and a SEP IRA before April, so assume I would need to file for an income tax extension for 2016, which seems like a hassle. Also, is there anyway to rollover my SEP IRA later this year (or next) to my employee 401k? That would take the tax hit out of the question.
I realize I just asked about 20 questions in one thread, sorry.
I very much appreciate any replies and help.
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