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Schwab Personal Defined Benefit Plan and Solo 401k for Megaback Door Roth

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  • Schwab Personal Defined Benefit Plan and Solo 401k for Megaback Door Roth

    Personal Situation: 2 High Earning Couple-
    . Lower Earning Spouse is independent Contractor with 1099 income of 180K. This income is discretionary
    Currently with Fidelity Prototype solo 401k . In 2020 will contribute 19.5K employee + 52K ( 20% of profits/max employER contributions)

    Goal: Maximize tax advantaged Space
    I have been in contact with schwab personal/solo personal defined benefit plan . Actuarial analysis has been done . Spouse can contribute 70k pretax starting in year 1 and then subsequently increasing every to 95k in year 10 if the plan is maintained that long and then be rolled into IRA or solo401k on plan termination

    With personal defined benefit plan, one can still do employEE contribution of 19.5K to solo401k however one is limited in the employER/profit sharing contribution . Schwab will perform calculation of the the employER/profit sharing contribution, it ends being approx 6% of profits.

    I was thinking of engaging employee fiduciary to become the custodian and tpa of the fidelity solo401k such that we can still contribute 19.5K employEE contribution and contribute ( 58K-19.5K)= 38.5K as employEE aftertax non roth contribution ( megaback door roth)

    This maximizes pretax space ( defined benefit plan) and maximizes Roth Space.

    Would appreciate any comments re plan or faults in reasoning

  • #2
    good plan.

    First: what is your work situation? Are you an owner in private practice? Or employed.


    • #3
      I am employed ( W2), so I personally only have workplace 401k. I am a high earner but have limited tax advantaged space . We already do regular backdoor roth, HSA etc
      Spouse is the independent contractor ( 1099 income) with more options more creating tax advantaged space


      • #4
        We have been happy with EF for our combo plan but it helps that we have someone here who is in charge of overseeing setup and maintenance (are you setting up CB or "traditional" DB plan?)

        We have a couple of clients with Schwab for DB and I've been impressed with their services and knowledge, too.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          I believe the Schwab personal/solo defined benefit plan is a cash balance plan