Another Backdoor Roth Question

[goatmom]

I want to thank you all upfront for your help.  This website has helped me so much.  So here is my question:

I wanted to do a backdoor roth this year.  I converted my sep IRA to solo 401k back in December.

My husband still has a sep and a traditional IRA.

Can I do the backdoor roth for myself?

Our money is currently at EJ.  Can I open my roth at Vanguard?  Husband put everything at EJ due to his relative opening an office - trying to help him out with his business.

 

 

 

[jfoxcpacfp]

Yes, you can do a backdoor Roth for yourself. You can contribute for 2017 until 4/17/18 and then convert at any time.

Your husband can also do one, but he will owe taxes on the conversion.

See Explaining Backdoor Roth IRAs.

[Peds]

1) IRAs are individual. his accounts do not affect yours. so yes, you can do a backdoor rIRA. he can as well, but as jfox stated it will cost you so dont.

2) get away from EJ. call up vanguard/fidelity/schwab and get your stuff out of there. will save you potentially hundreds of thousands of dollars.

[goatmom]

Thanks for all the help.  Can I do the backdoor roth somewhere else and leave my solo 401k at EJ? DH not open to moving stuff at this time.

[jfoxcpacfp]

Yes, that is fine. You do not have to have all of your accounts with one custodian, although it will be simpler in the long run.

I understand that you want to help, and you're doing it with your eyes open. Maybe wait until he starts hitting on you for whole life or annuities to move your account.

[DR R]

Can someone address this question and point me to a reference if possible:

I have a traditional IRA and a company sponsored 401k.

I would like to open a non deductible traditional IRA, fund it to the maximum allowed ( $6500) and then do a back door conversion of this money into a Roth IRA.

I understand I need to transfer my traditional IRA money into my 401K in order to avoid taxes when I do the back door Roth conversion.

Question:   Do I need to know what part of my traditional IRA money is principal versus gains in terms of transferring the entire traditional IRA to the 401K?   Or, do you just transfer the entire traditional IRA account and not worry about what is principal and what is gain??

[jfoxcpacfp]

DR R wrote:

Question:   Do I need to know what part of my traditional IRA money is principal versus gains in terms of transferring the entire traditional IRA to the 401K?   Or, do you just transfer the entire traditional IRA account and not worry about what is principal and what is gain??

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No, the balance in the account is 100% taxable at ordinary income tax rates (meaning, there is no special capital gains treatment) so you just transfer the whole thing, assuming your current 401k accepts rollovers (not all do, so check your Summary Plan Description). I am also assuming your TIRA is all pre-tax - correct?

[DR R]

Thank you for your quick reply.  Yes, by Traditional IRA is all pretax.

[Peds]

goatmom wrote:

Thanks for all the help.  Can I do the backdoor roth somewhere else and leave my solo 401k at EJ? DH not open to moving stuff at this time.

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can you get a new DH? its kinda that bad...

[spiritrider]

Peds wrote:

goatmom wrote:

Thanks for all the help.  Can I do the backdoor roth somewhere else and leave my solo 401k at EJ? DH not open to moving stuff at this time.

Click to expand…

can you get a new DH? its kinda that bad…

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I was thinking it, but was not going to say it, but now I can't help myself. There are many kinds of forgivable sins, but EJ ...

[Hank]

Is your Edward Jones guy / gal a family member or a real close friend?  If they're an actual friend, they'll keep golfing or fishing with you after you move your funds to Fidelity or Vanguard.  If they don't want to keep golfing with you, then you know they were more interested in using your money to send their kids to private schools / universities instead of your own kids having the option to go to non-state schools.

[goatmom]

Hi all.  I realize I sent this original question back in January.  Still at EJ.  Have a meeting set up for this week with DH and EJ guy.  My dh states that relative says we are paying no fees at all at EJ.  Is that even possible?  I pointed out the high front load fees. I suppose these are just sunk costs?  DH opened roths for our two teens that help at my business and I realized they have not only yearly fees but also 1.35 percent AUM cost.  DH not that interested in finance stuff - feels overwhelmed with the rest of life and I get that as he is very busy doc.  He is starting to trust me and after last year's tax season was very impressed with all that I have learned and the money I save by doing my back door roth and switching from a sep to a solo 401k.  Thanks again for any thoughts you have as I head into this conversation.

[jfoxcpacfp]

goatmom wrote:

My dh states that relative says we are paying no fees at all at EJ.  Is that even possible?

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Yes, it is possible that people think this. No, it is not possible that EJ is in business just for the warm fuzzies. The high front load fees are gone forever.

You and your DH should sit down with a fee-only planner if you are looking for help or just move the funds under your own supervision if you are comfortable doing so. If your DH is not interested in the finance stuff, why doesn't he just let you handle it all and leave his relative's advice alone? Is the EJ dude a friend?

[goatmom]

No - EJ dude is a close relative and a very good guy.  He had no financial training before getting hired by EJ - dh was trying to "help him out" by putting our money with him.  I really am not excited to send more money to my solo 401 k this year and lose up to 5.5 percent off the top.  Also - still not sure why I had to find all this stuff out by reading blogs - guess I felt we were being taken care of these past few years.  I do kind of actually enjoy understanding all this financial stuff which is a shocker.  Never thought it was something I would care about. Thanks for your help!

[jacoavlu]

It’s pretty simple. Your EJ agent, your relative, this “good guy” does not have your best interests in mind. Not when he’s letting you buy some fund with a 5% load.

He doesn’t have your kids best interest in mind either.

Of course he didn’t have financial training. He doesn’t need it.

You can and should move your solo 401k by establishing a solo 401k at another institution like Fidelity, E*TRADE, Schwab, or Vanguard not as a new plan but as an amendment of your prior plan.