Announcement

Collapse
No announcement yet.

6months employee/ 6 months IC

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • 6months employee/ 6 months IC

    I will be leaving my academic/university job to start solely as an independent contractor in July. Currently I am doing a bit of both employee and IC work, but I still receive all benefits, insurance, etc and a W-2 from the University.

    University benefits:

    1. Mandatory pre-tax, employee/employer contribution 403(b)

    2. Roth 403(b)

    3. Paid medical insurance

    Other Personal investments:

    1. Roth IRA (started when I was a medical student/resident)

    2. Traditional IRA, which was used to do a backdoor Roth, but currently with $0

    A couple of questions and areas I would appreciate advice in:

    1. What to do with my University 403(b) accounts, both pretax and Roth. They are currently in Fidelity, and I would prefer to have them all at Vanguard for ease of checking in on things, amongst other reasons. Can I just roll them over to equivalent accounts in Vanguard? Is there an equivalent to a Roth 403(b) that I can convert to without tax penalty?

    2. I have not set up any personal retirement accounts. I was waiting to see how much money would be invested in my University accounts before I really looked to see how much more I could or wanted to invest in personal accounts. I am a little confused as to the amounts I could contribute to any personal account, since I will have already contributed quit a bit on the employee side of things already. (Also might want to have extra cash on hand to buy a house this year, etc.)

    3. I will have to shop for and purchase my own health insurance. Is it possible to qualify for an HSA and high deductible account if I have already been insured for the first 6 months of the year? An HSA/high deductible account is something I think I would be interested in long term, but unsure if I would be allowed to this year.

     

    Thank you for any feedback!

  • #2

    1. You r/o your Roth 403b to a Roth IRA and the pretax amount to the SOLO-k you will set up based upon your IC profits. I'm sure someone else can tell you how this will work with Vanguard.

    2. Can't give you the answers without knowing more about your W2 contributions. You can contribute up to 20% of your net profits to a SOLO-k but any money you will need for big ticket items (such as house downpayment) in the next 5 years should be kept liquid.

    3. Yes, you can change over to a HDHP and HSA for the last 6 months of the year if you are no longer covered by the work insurance plan (COBRA, for example).


    This is a critical juncture in your life; you would benefit from financial planning.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #3
      1. You could roll over the Roth 403b to a Roth IRA at Vanguard.

      However, Vanguard's Individual 401k does not accept rollovers. Rolling the traditional 403b to a traditional IRA will interfere with the backdoor Roth contributions you are almost certainly going to require.

      Also, Vanguard does not allow Admiral shares in their i401k.

      You may not want to hear it, but if you want to consolidate at the lowest cost for your situation, Fidelity may be a better choice. They do allow rollovers and lower cost Premium class shares in their Self-employed 401k.

      2. Your maximum one-participant 401k employee deferral = $18k - W-2 403b employee deferral.

      You will be able to make an employer contribution of 20% of net self-employment income (net business profit - 1/2 SE tax).

      Normally, the $54K annual addition limit (employee + employer contributions) is per employer. However, a 403b is considered controlled by the participant. So the one-participant 401k annual addition is limited to $54K - 403b annual addition (employee deferral + employer contributions).

      3. You can choose an HDHP/HSA option if it makes financial sense for your circumstances. Also, there is a "last month" rule that allows you to contribute the full yearly limit if you are eligible on 12/1. However, there is a 10% penalty if you do not keep the HDHP and remain eligible for the entire following year.

      Comment


      • #4


        Normally, the $54K annual addition limit (employee + employer contributions) is per employer. However, a 403b is considered controlled by the participant. So the one-participant 401k annual addition is limited to $54K – 403b annual addition (employee deferral + employer contributions).
        Click to expand...


        spiritrider - I wondered about that but didn't know if the rule would still apply after HtxDoc is no longer in the 403b plan - apparently so, correct?
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5
          The employee deferral limit and the annual addition limit each apply to contributions for that tax year.

          Comment

          Working...
          X