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  • ira transfer

    so i discovered WCI several months ago and have have been reading and learning a tremendous amount.  Wish I would have found this much earlier in my career!.  First thing i did was figure out that my one of the great ideas my "money guy" convinced me off was to move my old 401K from residency into an IRA--into a variable annuity no less, with annual expenses of nearly 2.6%!  Since i have 1099 income i was able to figure out how to set up a solo 401K with etrade and transferred that money there (paid the surrender charges of about 2,800 bucks).  So then i was free to do the backdoor roth thing and didn't have to stomach the high fees of the annuity.   The problem is that my wife also transferred her old work 401K into the same type of variable annuity IRA.  She is not employed at this point so she cant do a solo 401K.  What can i do with her money to get it out of there (it's about 10K).  I want to be able to do a backdoor roth for her in the future as well.

    thanks

     

  • #2
    If there's no surrender charge, she can transfer the entire balance to another IRA via a trustee-to-trustee transfer.  If there is a surrender charge, she can transfer the penalty-free portion to another IRA or pay tax and convert to a roth.  Also, your wife doesn't have to have earned income to contribute to an IRA.

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    • #3
      there is a 7% surrender charge. the penalty free portion is very small.

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      • #4
        I guess it really depends on what the expected returns are with the annuity vs whatever she would be investing instead.  Another way of looking at it: if this money had been invested instead in an S&P 500 index fund, it would have lost 10% over the past 3 months.  At least to me, that makes it easier to stomach the 7% surrender charge and replace that annuity with an investment that has a higher expected return in my limited tax-sheltered space.

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        • #5




          so i discovered WCI several months ago and have have been reading and learning a tremendous amount.  Wish I would have found this much earlier in my career!.  First thing i did was figure out that my one of the great ideas my “money guy” convinced me off was to move my old 401K from residency into an IRA–into a variable annuity no less, with annual expenses of nearly 2.6%!  Since i have 1099 income i was able to figure out how to set up a solo 401K with etrade and transferred that money there (paid the surrender charges of about 2,800 bucks).  So then i was free to do the backdoor roth thing and didn’t have to stomach the high fees of the annuity.   The problem is that my wife also transferred her old work 401K into the same type of variable annuity IRA.  She is not employed at this point so she cant do a solo 401K.  What can i do with her money to get it out of there (it’s about 10K).  I want to be able to do a backdoor roth for her in the future as well.

          thanks

           
          Click to expand...


          Variable annuity inside an IRA for both of you...I hope this is your "ex" money guy.

          Can you hire your wife to do some part-time work and get her on your Solo-k? Of course, you'll have the surrender fee, but I would still bet that she'll come out ahead in the long run.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6




            so i discovered WCI several months ago and have have been reading and learning a tremendous amount.  Wish I would have found this much earlier in my career!.  First thing i did was figure out that my one of the great ideas my “money guy” convinced me off was to move my old 401K from residency into an IRA–into a variable annuity no less, with annual expenses of nearly 2.6%!  Since i have 1099 income i was able to figure out how to set up a solo 401K with etrade and transferred that money there (paid the surrender charges of about 2,800 bucks).  So then i was free to do the backdoor roth thing and didn’t have to stomach the high fees of the annuity.   The problem is that my wife also transferred her old work 401K into the same type of variable annuity IRA.  She is not employed at this point so she cant do a solo 401K.  What can i do with her money to get it out of there (it’s about 10K).  I want to be able to do a backdoor roth for her in the future as well.

            thanks

             
            Click to expand...


            It might be possible to negotiate the withdrawal of this variable annuity WITHOUT surrender fees.  One of my clients was able to do that with his provider, especially because the provider DID NOT inform him of the surrender charges in writing prior to selling the product to him.  Unless the fees were all disclosed upfront in writing, you can get this done, because the alternative (arbitration) is not something this adviser's company would want as that might entail paying damages, which can be avoided if they simply let you roll the money over.

            Yes, you might be able to pay your wife a salary and also contribute into a solo 401k on her behalf, but make sure that there is a formal job description of her duties when you do that.

            Never hire commissioned or asset-based compensated advisers because they have huge conflicts of interest and their fees would eat up your account given that nobody has any control over returns.
            Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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            • #7
              Thanks to the professionals on their insight here.

              We are in the exact same boat. We are talking to the "advisor's" company- but they are yet to return to us with a resolution.

              Otodoc, please keep us posted with your outcome, we could all learn from this process!

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              • #8
                Thanks for the posts!.  I will definitely look through the original contract to see if surrender charges were mentioned. It is with a large well known company so i suspect that they dotted all the i's.  My solo 401k business is taking call at a hospital, so there is really no way i can think of to add my wife as an employee.  I'm going to try to figure out if i can just pay the surrender charges and pay the taxes and do a ROth conversion on it.  I'm just glad the amount is not high or i would be even madder than I currently am at the guy that sold this thing to me.  I'm just glad I found WCI in time to prevent me from buying the whole life products that the advisor has been pushing so hard!

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                • #9
                  @Otodoc - a couple of thoughts:

                  1. You can do a backdoor Roth for your wife as a spousal IRA (you mentioned in original post 13406)

                  2. Just because you are taking call does not mean you do not need a p.t. employee to help with bookkeeping and other administrative work. After all, you have your own business and also work ft in your 'day' job (I am presuming). Not unreasonable to need admin assistance. Even if 1099 is your ft job, no reason you could not use help in your office. I do not see this as any kind of 'red flag'. Just have a decent employee agmt, same as you would for any employee, as Larry mentioned.

                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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