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Anyone with a 409A?

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  • Anyone with a 409A?

    I'm fairly new to this site and have been digging around for something similar to my current situation. I've read many of the blog posts and scrolled around on the forum but hoping for a little help.

    I'm currently employed with only a 409a offered as a retirement option, and I contribute 10% at this time. I have a previous 401k from before our group became hospital employees. The reason I'm reluctant to contribute more (although I can contribute up to 70%) is two fold: 1) in the (albeit unlikely) event the health system goes bankrupt, my retirement is technically subject to creditors. I'm told it is set up as a rabbi trust though, so this is a minor concern. 2) the biggest problem, if I leave my current situation, I have to take everything I've contributed and growth as a lump sum. And I'm only in my 30s, so this is a biggie for me.

    My partner and I each have a traditional IRA that we contributed pre tax dollars for about 3 years when he stayed at home with the kids since my plan is a nonqualifed plan. Now that he's working again and has a 401K available that he maxs out yearly, we can't use this any more.

    I've been reading about the backdoor Roths and haven't utilized this yet but I plan to, convert the IRAs and taking the tax hit this year, if I'm understanding correctly since it was pre tax dollars.

    Any other suggestions on minimizing taxes without contributing more to the 409a? Other than my employed position, I also get a 1099 for medical directorship of a home health/hospice program.

     

     

  • #2


    I’ve been reading about the backdoor Roths and haven’t utilized this yet but I plan to, convert the IRAs and taking the tax hit this year, if I’m understanding correctly since it was pre tax dollars.
    Click to expand...


    Backdoor Roth contributions are definitely a good idea. But, as you allude to, you'll need to clear the deck for future Backdoor Roth contributions by paying the tax on your existing Traditional IRAs or Rollover IRAs to convert them to Roth.


    Any other suggestions on minimizing taxes without contributing more to the 409a? Other than my employed position, I also get a 1099 for medical directorship of a home health/hospice program.
    Click to expand...


    Depending upon the amount of this income, you might want to consider opening a Solo 401(k). With a Solo 401(k), between employee deferrals and profit sharing contributions, you could put away 100% of your 1099 income up to $54,000 plus a catch-up amount if you're 50 or older.

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