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Advice for family member with only SEP IRA available

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  • Advice for family member with only SEP IRA available

    I'm helping a family member get her financial house in order. Her new job only offers a profit sharing SEP IRA and no 401k. Contributions vary yearly based on how well the company does. Her income will be too high to contribute to a Roth IRA. She's fresh out of school and has ~$300k student debt refinanced to 3.5%. I helped her get a Roth IRA started last year. She obviously needs to prioritize her student loans, but I was trying to think of how to get her more tax protected space. Income this year will be ~$300k. Age 30. Right now she's got ~$10k in SEP IRA and $5k in Roth IRA. She's got an unrelated side hustle that makes about $10k. I posted to bogleheads and got some ideas, and wanted to see if there are any thoughts from this community.

    She's wanting to pay off student loans ASAP, but eventually will want to invest with more tax protected space. My plan was to suggest she open a solo 401k at fidelity with side hustle (schedule F income) and do a yearly transfer of the SEP IRA into the solo 401k which will open up backdoor Roth IRA option. Also, an HSA would be a good idea if she has a HDHP.

  • #2
    A SEP is a great thing to have if you're not the boss. 100% of her contributions will be paid by the employer, who must contribute the same % for all employees, including the owners. I agree with the solo-k idea (schedule F, seriously?)

    If she has a qualifying HDHP, an HSA is also a good idea.

    If she wants to invest in more tax-protected space, she'll need to increase her side hustle income, get a new job, or talk management into changing the current retirement plan.

    Sounds like you've covered the bases nicely.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087