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resident moonlighting and Roth Solo 401k

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  • resident moonlighting and Roth Solo 401k

    Hey WCI, saw a post of yours on SDN where you recommended setting up a Roth Solo 401k with Vanguard.

    I've got Vanguard already for my Roth IRA. How would I set up this Roth Solo/Individual 401k for the 1099 income I make moonlighting? Do I need to keep any specific records or put out statements as the "employer"?

  • #2
    you go to Vanguard and open an account.


    • #3
      I wouldn't rec Vanguard for a solo-K. They don't allow rollovers, can only buy investor class shares and I don't think they have a Roth option (not sure tho). If you want a Roth solo-K, look at TDA or Etrade. You want the ability to have rollovers - you'll likely change jobs, etc and you'll want this pot to roll things into cleanly.


      • #4
        On the records/reporting question:

        • You need to make a written employee deferral election on or before 12/31 of the year you adopt the one-participant 401k plan and any time you change the election. You retain this in your own records. It only needs to be available if the IRS requests it (rare).

        • You need to maintain records of your own pre-tax traditional 401k deferrals, post-tax Roth 401k deferrals and/or pre-tax employer contributions. Even if all of your deferrals are post-tax to the Roth designated sub account, any employer contributions must always be pre-tax.

        • You only claim deductions for pre-tax traditional 401k deferrals and pre-tax employer contributions and report those combined on Form 1040 line 28. Post-tax Roth deferrals are not reported on Form 1040 unless (the unlikely event for physicians) your AGI is low enough to claim the Saver's Credit.

        • There is no employer (you) reporting for one-participant plans unless the year end balance in the 401k account(s) > $250,000 or you are terminating the plan. If either of these are true you must file Form 5500-EZ.


        • #5