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  • Solo-401k worth it??

    For the year 2016 I will be employed as a 1099 until I permanently switch over to my new job Oct 2016, which offers a 401k. Currently, I have converted my SEP-IRA into a rollover IRA at Vanguard. Unfortunately, it is still sitting in a money market awaiting to be invested.

    1) Since this is my last year of 1099 employment is it worth it to rollover to a Solo-401k at Fidelity? I anticipate contributing the 25% limit of current salary. Would that mean $18k + 25% of 1099 salary?

    2) Will I also be able to contribute $18K to my new employers 401k starting in October?

    3) After reviewing a list of fund options that my new employers 401k offers, I am not confident with rolling over the entire sum that would be in the Solo-401k. Since I will no longer be self-employed, I understand that I will no longer be able to contribute to the Solo-401k. However, could I keep the money invested?

    4) I will not be covered by a retirement plan at work until Oct 2016 and anticipate making less than $184,000 this year. Does this mean I will be able to take a full deduction up to the amount of my contribution limit ($5500) for a tIRA? https://www.irs.gov/retirement-plans/pl ... an-at-work

    5) Should I consider contributing to a Roth instead of Traditional? This year we will make ~$110k(25% tax bracket) but will have a consistent combined salary of $230k(28% tax) for 2017.

     

  • #2
    1) Yes there is no real downside to setting up the solo 401k.  18k + 25% up to the max of 53k depending on your age

    2) No you only get one 18k employee limit over all your plans.

    3) You can and probably should just keep the funds in the solo 401k.  Then you can contribute to it later if you again have 1099 income or rollover IRAs.

     

    I will let someone else tackle the last two

     

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    • #3




      For the year 2016 I will be employed as a 1099 until I permanently switch over to my new job Oct 2016, which offers a 401k. Currently, I have converted my SEP-IRA into a rollover IRA at Vanguard. Unfortunately, it is still sitting in a money market awaiting to be invested.

      1) Since this is my last year of 1099 employment is it worth it to rollover to a Solo-401k at Fidelity? I anticipate contributing the 25% limit of current salary. Would that mean $18k + 25% of 1099 salary?

      2) Will I also be able to contribute $18K to my new employers 401k starting in October?

      3) After reviewing a list of fund options that my new employers 401k offers, I am not confident with rolling over the entire sum that would be in the Solo-401k. Since I will no longer be self-employed, I understand that I will no longer be able to contribute to the Solo-401k. However, could I keep the money invested?

      4) I will not be covered by a retirement plan at work until Oct 2016 and anticipate making less than $184,000 this year. Does this mean I will be able to take a full deduction up to the amount of my contribution limit ($5500) for a tIRA? https://www.irs.gov/retirement-plans/pl … an-at-work

      5) Should I consider contributing to a Roth instead of Traditional? This year we will make ~$110k(25% tax bracket) but will have a consistent combined salary of $230k(28% tax) for 2017.
      Click to expand...



      1. Yes, r/o to a SOLO-k. You never know when it might come in handy in the future, i.e. when you may have a 401k you wish to r/o from new job b/c you have a much better offer...

      2. No.

      3. Yes. Highly recommend the SOLO-k as you will have complete control. Once you r/o to your new 401k, it is locked up until you terminate employment, in almost all cases.

      4. No. The $184k - $194k phaseout is for when you do not have a plan option at any employer during the year but your spouse does. In your case, you will fall under the $98k - $118k phaseout level.

      5. I would agree that this is the year to contribute to Roths for you and your spouse. According to question 4, however, I thought you were making close to $184k. If you are making $110k, 40% of your TIRA contribution w/b deductible, but 60% wouldn't, so you would be limited to a backdoor Roth of $3,300 and deductible of $2,200. If your spouse d/n/h a plan at work, your spouse can go either way (deductible TIRA or Roth).

      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #4







        For the year 2016 I will be employed as a 1099 until I permanently switch over to my new job Oct 2016, which offers a 401k. Currently, I have converted my SEP-IRA into a rollover IRA at Vanguard. Unfortunately, it is still sitting in a money market awaiting to be invested.

        1) Since this is my last year of 1099 employment is it worth it to rollover to a Solo-401k at Fidelity? I anticipate contributing the 25% limit of current salary. Would that mean $18k + 25% of 1099 salary?

        2) Will I also be able to contribute $18K to my new employers 401k starting in October?

        3) After reviewing a list of fund options that my new employers 401k offers, I am not confident with rolling over the entire sum that would be in the Solo-401k. Since I will no longer be self-employed, I understand that I will no longer be able to contribute to the Solo-401k. However, could I keep the money invested?

        4) I will not be covered by a retirement plan at work until Oct 2016 and anticipate making less than $184,000 this year. Does this mean I will be able to take a full deduction up to the amount of my contribution limit ($5500) for a tIRA? https://www.irs.gov/retirement-plans/pl … an-at-work

        5) Should I consider contributing to a Roth instead of Traditional? This year we will make ~$110k(25% tax bracket) but will have a consistent combined salary of $230k(28% tax) for 2017.
        Click to expand…



        1. Yes, r/o to a SOLO-k. You never know when it might come in handy in the future, i.e. when you may have a 401k you wish to r/o from new job b/c you have a much better offer…

        2. No.

        3. Yes. Highly recommend the SOLO-k as you will have complete control. Once you r/o to your new 401k, it is locked up until you terminate employment, in almost all cases.

        4. No. The $184k – $194k phaseout is for when you do not have a plan option at any employer during the year but your spouse does. In your case, you will fall under the $98k – $118k phaseout level.

        5. I would agree that this is the year to contribute to Roths for you and your spouse. According to question 4, however, I thought you were making close to $184k. If you are making $110k, 40% of your TIRA contribution w/b deductible, but 60% wouldn’t, so you would be limited to a backdoor Roth of $3,300 and deductible of $2,200. If your spouse d/n/h a plan at work, your spouse can go either way (deductible TIRA or Roth).


        Click to expand...


        Thanks for your reply. My spouse does have his own 401k at work. Looks like I will get the Solo-401k set up since the fund options are much better than the offerings at my new job. The new job does not offer a match so it looks like the Solo-401k is the way to go for this year.

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