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When to stop contributing to retirement accounts?

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  • When to stop contributing to retirement accounts?

    So today I moved $12k to prepare our accounts for 2x backdoor Roth IRAs and I've also been considering starting a trading business for a solo 401k as well. As I look at the accounts, I wonder if it's necessary and what's the marginal benefit of contributing more to retirement accounts after a certain level.

    Roth IRA is around $700k
    Taxable is around $5.4M
    401k is around $230k

    I'm partially retired so I'll have some locums shifts for earned income and my wife's working for our health insurance so we can contribute to IRAs as long as they don't change the rules. I have her contribute to her 401k up to the match.

    This year I'll be hit with $1M+ in capital gains and will pay quite a bit in taxes. This coming up year I plan on continuing to hustle and have already deferred quite significant gains to next year already so I'll probably have even more than that next year.

    Any new Roth IRA contributions are just a small drop in the bucket. If I start a business to max a solo 401k, $20500 or up to $61000 for potential deductions on possible $1-2M capital gains. So at what point is it unnecessary to contribute to Roth IRAs or the extra complexity of creating a business for a solo 401k?

    Are there significant benefits for IRAs and 401ks for estate planning in the very distant future?

  • #2
    Ya I mean 12k on a 6.5million portfolio is a rounding error. Where did all your gains come from?

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    • #3
      As Bud Fox said to Gordon Gecko - how many yachts can to waterski behind?

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      • #4
        Since its such small potatoes i almost come to the opposite conclusion. Why not get 12k/yr in a tax free account compounding forever? Takes like 2 minutes a year...

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        • #5
          "At what net worth is it no longer worth it to pick up a $100 bill on the sidewalk?"

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          • #6
            Originally posted by Nysoz View Post
            Are there significant benefits for IRAs and 401ks for estate planning in the very distant future?
            What if the step-up basis upon death was eliminated in the future? That Roth account looks pretty nice. Since we don’t know what gifts future legislation will place upon us the preferred account upon our demise may change.

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            • #7
              Bought lots of TSLA shares and then TSLA options. Now use a fair amount of leverage/margin and risk for more profit by selling options.

              Yeah I plan on continuing to add to the Roth IRA since it’s relatively easy and straightforward while we can and still have earned income. It just doesn’t move the needle as much as it did previously. Then it comes down to what to do with it in the future. As long as I’m making more than I need in my taxable account I’m never drawing anything down unless they make me.

              Forming the LLC to be taxed as an S Corp with payroll and such gives me hesitation as it seems to add a lot of complexity in setting it up. Then the extra costs of maintaining it and filing taxes. Does all of that make the solo 401k deductions worth it? I think I would come out ahead financially but I’m not too sure the hassle would be worth it.

              Comment


              • #8
                Originally posted by Nysoz View Post
                Bought lots of TSLA shares and then TSLA options. Now use a fair amount of leverage/margin and risk for more profit by selling options.

                Yeah I plan on continuing to add to the Roth IRA since it’s relatively easy and straightforward while we can and still have earned income. It just doesn’t move the needle as much as it did previously. Then it comes down to what to do with it in the future. As long as I’m making more than I need in my taxable account I’m never drawing anything down unless they make me.

                Forming the LLC to be taxed as an S Corp with payroll and such gives me hesitation as it seems to add a lot of complexity in setting it up. Then the extra costs of maintaining it and filing taxes. Does all of that make the solo 401k deductions worth it? I think I would come out ahead financially but I’m not too sure the hassle would be worth it.
                who is advising you to set up an S corp?

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                • #9
                  Ha. I'm part time and between 401k/PS/CBP I realized it is a bit of overkill. But something to be said for assets that are immune to creditors....

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                  • #10
                    Yes let's hear about this trading business

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                    • #11
                      He wrote a thread on it already

                      Comment


                      • #12
                        You should def contribute to BD Roth, even with a large balance.

                        RE: trading biz, no idea really, but this provides some info: https://www.irs.gov/taxtopics/tc429

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                        • #13

                          As pointed out by xraygoggles, there is an extremely high hurdle to be considered a "trader in securities." To be considered as business income from a trade or business eligible for an employer retirement plan. From Tax Topic 429:
                          • You must seek to profit from daily market movements in the prices of securities and not just from dividends, interest, or capital appreciation;
                          • Your activity must be substantial; and
                          • You must carry on the activity with continuity and regularity.
                          You can not just be an investor, you must be an active day trader.

                          Comment


                          • #14
                            Originally posted by Nysoz View Post
                            So today I moved $12k to prepare our accounts for 2x backdoor Roth IRAs and I've also been considering starting a trading business for a solo 401k as well. As I look at the accounts, I wonder if it's necessary and what's the marginal benefit of contributing more to retirement accounts after a certain level.

                            Roth IRA is around $700k
                            Taxable is around $5.4M
                            401k is around $230k

                            I'm partially retired so I'll have some locums shifts for earned income and my wife's working for our health insurance so we can contribute to IRAs as long as they don't change the rules. I have her contribute to her 401k up to the match.

                            This year I'll be hit with $1M+ in capital gains and will pay quite a bit in taxes. This coming up year I plan on continuing to hustle and have already deferred quite significant gains to next year already so I'll probably have even more than that next year.

                            Any new Roth IRA contributions are just a small drop in the bucket. If I start a business to max a solo 401k, $20500 or up to $61000 for potential deductions on possible $1-2M capital gains. So at what point is it unnecessary to contribute to Roth IRAs or the extra complexity of creating a business for a solo 401k?

                            Are there significant benefits for IRAs and 401ks for estate planning in the very distant future?
                            $12k in Roth is better than $12k in taxable. It takes almost no effort. We do it every year.

                            Comment


                            • #15
                              I wouldn't trust a trader if they didn't tax protect their own accounts.

                              Comment

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