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  • #16
    Originally posted by orthowife View Post

    We are in the 35% bracket and may eventually be in the 37% bracket.
    It seems after further probing that he definitely will have a 401k at some point either this tax year or next.

    To summarize your advice:

    If he gets it this year/tax season--->I should convert my traditional to ROTH
    If he gets it next year--->ALSO convert it to ROTH?
    If for some reason he never gets a 401k--->leave it in my traditional ira
    leave his in traditional ira no matter what
    No, I would convert your traditional IRA to Roth IRA immediately for your 2020 contributions. You could also do 2021 traditional IRA contribution starting today (money will clear next week) and convert to Roth IRA since it's likely your husband will be getting a 401k soon. If he never gets a 401k, I'd go back to taking the deduction on your traditional IRA contributions.

    Leave his 2020 traditional IRA contribution as is and take the deduction on your taxes. Don't make his 2021 contribution yet. If he gets the 401k for 2021, then that'd make the traditional IRA contribution nondeductible. If for some reason he could NOT roll over his IRA money into the 401k, then that'd be a problem. Best to wait.

    It is okay that I used money from our bank account to fund the traditional IRA and I didn't "double tax us" as long as I tell my accountant what you told me "You claim the deduction on line 19 of your 1040 using schedule 1. If you convert your traditional IRA, then you'll need to file form 8606 for you as well. It's only a mistake if you don't file the correct paperwork to take the deduction AND don't file 8606 to create a basis for your nondeductible contribution and pay taxes on the conversion."
    Yes, your accountant should be familiar with this concept. Not all are unfortunately. If they screw it up, get a new one.

    In the future with a 401k we put 19,500 and then another 6k for each of us in a backdoor ROTH ----if this is not enough to support us in retirement-what do we do next? I saw that I could somehow start my own business and open a sep ira where we could contribute a lot more. Is this the route lots of stay at home dr wives take while raising kids? Do part time jobs ever allow one to use their retirement plans?
    You could do that (and open a solo 401k, not SEP IRA), but you'd actually have to...you know...work and make money. Your employee contributions would be limited by the amount of revenue generated. Most docs just move on to taxable brokerage accounts (they're not that bad, can be quite advantageous).

    If my husband's business opens the 401k are you saying we should rollover the traditional ira money into that 401k? Is that what you mean by "incoming rollovers"?
    Yes. If they don't, he won't be able to do backdoor Roths in the future unless he moves money out of the traditional and SEP IRAs (opening solo 401k, e.g.). Don't make continuing traditional IRA contributions for him in this scenario. Either backdoor Roth or skip.

    We have an HSA that we maxed out (we knew we were having twins this year/lots of high risk dr. visits)--I just got the itemized receipt from the hospital---I should go ahead and use the money thats in our HSA correct? From what I read some drs use it later as investing tools but we aren't at that level yet (stud loans arent paid off retirements arent maxed out etc) right?
    If you can cash flow it, I would just pay the bills out of pocket. You can then leave the money in the HSA to grow tax-free and, if you ever need the money, you can submit these receipts at any time to get reimbursed.

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    • #17
      Originally posted by jfoxcpacfp View Post
      Don’t overthink (or over-worry) this. A taxable account is a great retirement vehicle until a tax deductible account is available. I imagine you’ll have that, too, within a year or two. Your future FI self will thank me.
      Hi jfoxcpacfp , does making partner allow for a tax deductible account? Or what do you mean that will happen within a year or two?

      I’m in a similar situation where my employer does not have retirement options. Hoping to become partners in near future. Does that open options for other retirement options beside just contributing to a taxable account?

      thank you

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      • #18
        Originally posted by chocolatebear11 View Post

        Hi jfoxcpacfp , does making partner allow for a tax deductible account? Or what do you mean that will happen within a year or two?

        I’m in a similar situation where my employer does not have retirement options. Hoping to become partners in near future. Does that open options for other retirement options beside just contributing to a taxable account?

        thank you
        A retirement plan must be adopted at the partnership (not partner) level. Of course, you can make use of an individual IRA to be converted to a Roth (aka a backdoor Roth) but you will have no option to participate in a qualified plan with that employer/entity.

        When mentioned “a year or two”, i was alluding to orthowife’s statement “(said they may have one soon)”.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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