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Solo 401k

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  • Solo 401k

    My wife recently received notification from Fidelity that a 403b account she has through a former employer must be rolled over to another account.  Long story short, the employer switched from a 403b to a 401k during her period of employment.  The majority of the money is in the 401k, but she had $4200 remaining in the 403b.  Because this is under $5,000, she was notified that it cannot remain in this account.  I am an Emergency doc, and we each do the backdoor Roth conversion every year.  Given this, I do not want to roll this amount into an IRA, as we would then be hit by the pro-rata rule.  My wife is currently not working, and we don't have plans for her to look for a job in the near future.

    My question is, what is my best option?  I know it is a small amount, but curious what others think.  My thought was to create a solo 401k, find a small source of money (she is a dietician, any ideas how to best find a small source of income are welcome), and then roll over the 403b into this solo 401k.  In this case, does she have to find a source of income that would send her a 1099 tax form?  Would it be better to pay just pay the taxes and convert to a roth account?  Thank you for the help.

  • #2
    I wonder if they would allow her to roll the 403b into the 401k, given the circumstances. It would probably require an exception to the SPD requirements but since they caused the issue, maybe they will allow her to rectify it.

    If not, I would probably roll over to a Roth and be done with it. I don't really think it is worth starting a business over.
    My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
    Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients


    • #3
      I agree with Johanna, unless you were considering a side business anyway.  If so, your plan to roll over to a self-employed 401k is a good one.


      • #4
        Can she get some 1099 income? Some surveys or what not? Otherwise yes, pay and move on.


        • #5
          WCICON24 EarlyBird
          Thank you to all! I wish she could roll it over to the other 401k, but because she is no longer employed, they won't allow it.  I'll probably just take the tax hit and be over with it.