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  • back door roth newbie

    Newly graduated dentist here. My wife is an independent contractor physical therapist and I’m a w2 employee for a corporate group. We file jointly.

    For me… is there any income limit to contributing to a traditional IRA and doing a back door Roth conversion for 6000 dollars?

    for my wife I set up a solo401k to do a mega back door Roth for 2021. She earns like 60k pretax, but since we file jointly we won’t know what her post tax income is until after we do our return. How am I supposed to make an after tax contribution to the 401k before January 1st if we don’t file our returns typically until March so we don’t know how much (after tax income) she will even have?

    thanks for your guidance everyone.

  • #2
    You can avoid the MAGI limit by just doing a backdoor Roth. Are you sure you’ve set the solo 401k up to do a mega backdoor Roth? Provided that you have, she should contribute the max employee deferral. You can calculate your taxes along the way (you should actually be able to do your taxes now) so you can know the employer deferral portion and then the remainder is your mega backdoor Roth.

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    • #3
      Re: the MBD Roth
      • Contribute $19,500 by 12/31 and
      • She has until the due date of her extended return (10/15, assuming you file an extension) to contribute the remaining amount
      • Make sure she has set up her plan to allow Roth conversions of the after-tax contributions
      What custodian are you guys using?
      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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      • #4
        We used a solo401k website to set up the solo 401k. It was only like 500 dollars to buy the plan. We don’t have a financial advisor currently.

        Then she’s using Schwaab for her accounts and I’m using Fidelity for mine.

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        • #5
          Originally posted by Toothdoc88 View Post
          We used a solo401k website to set up the solo 401k. It was only like 500 dollars to buy the plan. We don’t have a financial advisor currently.

          Then she’s using Schwaab for her accounts and I’m using Fidelity for mine.
          Ok, she sounds (hopefully) ok. I don’t know why you would need a financial advisor to help with a MBD Roth account. $500 is a reasonable fee to pay for set up and Schwab (in my experience, at least) does good work in this area. She’ll also pay an ongoing fee for compliance (filing), right?
          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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          • #6
            The broken record just turns and turns. You don't need a financial advisor, I haven't met one who would have a clue about a one-participant 401k with the MBDR.

            However, if you are a Backdoor Roth newbie and inexperienced with one-participant 401k plans, especially the Mega Backdoor Roth. I can't think of a worse scenario for someone than to use some website for what is essentially just one-participant 401k plan document services. Do you understand that you are almost entirely responsible 401k plan administration and compliance. This screams you should use a Third Party Administrator (TPA) at least for the first couple of years.

            A one-participant 401k is not just a larger IRA, it is still subject to the vast majority of 401k plan compliance. You don't know what you don't know. One-participant 401k plans supporting the MBDR Roth should come with something akin to a Surgeon General's Warning.

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            • #7
              Regarding setting up the Roth in Schwab and doing a conversion, it's easy. I just did one for me and one for my wife yesterday.

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              • #8
                Uh oh…. Is there a lot of administration and compliance that I need to do?

                where would I go about getting a TPA to handle that stuff? Or at least how to find out what I need to do

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