Advice on my investment plan needed please

[The White Coat Investor]

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand...

I'm not quite sure what you're asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I'll just make a few general comments:

The two of your make $295K- that's awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I'm not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

[Ajeagle6921]

The White Coat Investor wrote:

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand…

I’m not quite sure what you’re asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I’ll just make a few general comments:

The two of your make $295K- that’s awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I’m not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

Click to expand...

I am actually a W2 working for a small business with 40 employees.  I do a job once a year or so that I can get a 1099 with income of $1,000-$3,000.  Only reason I am wanting to do solo is so I can do back door roth without getting pro-rata tax on it.  I should have mentioned that earlier.

 

Just wanting to get experts opinion and especially your WCI opinion on the plan I have put forth.  Make sure I am not missing anything and I am investing in the right order.

 

We will have $11,000 a year going into backdoor roth ira.  I will have $17,500 going into solo traditional 401k.  Still can't decide on wife's 401k roth or traditional.

 

 

[Ajeagle6921]

The White Coat Investor wrote:

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand…

I’m not quite sure what you’re asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I’ll just make a few general comments:

The two of your make $295K- that’s awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I’m not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

Click to expand...

Also,

Would doing every other year of my wife's 401k in roth and then the following year in traditional?  Can you have both types in same account?  is this worth doing for more diversification come tax time in retirement?

[PenguinMD]

You can't mix 401k trad funds with 401k Roth funds. Your 401k plan administrator just creates two separate accounts: one for the 401k Roth and one for the 401k traditional. It's nothing complicated. You still log-in the same but instead of one account you see two.

That's how it works for us.

I can change any future contributions between the two. Some plans have limits on how many times you can change this is likely so you don't drive your admin crazy by switching every pay period .

Now the only concern is you're splitting your funds so you may not be able to get the "volume" discounts you may get with some of the funds inside the 401k plan.... This is highly plan and fund specific where the ER can change based on how much you invest so if you're splitting between two separate accounts it maybe hard to hit some of the thresholds.

Again, highly plan and fund specific so you will need to check. In some cases it doesn't matter.

Good luck!

[The White Coat Investor]

Ajeagle6921 wrote:

The White Coat Investor wrote:

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand…

I’m not quite sure what you’re asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I’ll just make a few general comments:

The two of your make $295K- that’s awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I’m not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

Click to expand…

I am actually a W2 working for a small business with 40 employees.  I do a job once a year or so that I can get a 1099 with income of $1,000-$3,000.  Only reason I am wanting to do solo is so I can do back door roth without getting pro-rata tax on it.  I should have mentioned that earlier.

 

Just wanting to get experts opinion and especially your WCI opinion on the plan I have put forth.  Make sure I am not missing anything and I am investing in the right order.

 

We will have $11,000 a year going into backdoor roth ira.  I will have $17,500 going into solo traditional 401k.  Still can’t decide on wife’s 401k roth or traditional.

 

 

Click to expand...

Okay, totally different scenario. If your employer is using a SIMPLE, I doubt you're going to be able to get your SIMPLE balance to zero each year. I guess you could keep a non-deductible IRA going in the background and hope to convert it in a few years. You can open an individual 401(k) for your SE income, but you'll need to read up on all the rules for rolling SIMPLEs over like the 2 year rule.

You can't put $17.5K into an individual 401(k) when you only make $1-3K in that business. You can only put in $1-3K.

As far as Roth vs Traditional 401(k), see this article: https://www.whitecoatinvestor.com/should-you-make-roth-or-traditional-401k-contributions/

Unfortunately, that is a complicated decision and involves some guesswork about the future.

[Ajeagle6921]

The White Coat Investor wrote:

Ajeagle6921 wrote:

The White Coat Investor wrote:

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand…

I’m not quite sure what you’re asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I’ll just make a few general comments:

The two of your make $295K- that’s awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I’m not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

Click to expand…

I am actually a W2 working for a small business with 40 employees.  I do a job once a year or so that I can get a 1099 with income of $1,000-$3,000.  Only reason I am wanting to do solo is so I can do back door roth without getting pro-rata tax on it.  I should have mentioned that earlier.

 

Just wanting to get experts opinion and especially your WCI opinion on the plan I have put forth.  Make sure I am not missing anything and I am investing in the right order.

 

We will have $11,000 a year going into backdoor roth ira.  I will have $17,500 going into solo traditional 401k.  Still can’t decide on wife’s 401k roth or traditional.

 

 

Click to expand…

Okay, totally different scenario. If your employer is using a SIMPLE, I doubt you’re going to be able to get your SIMPLE balance to zero each year. I guess you could keep a non-deductible IRA going in the background and hope to convert it in a few years. You can open an individual 401(k) for your SE income, but you’ll need to read up on all the rules for rolling SIMPLEs over like the 2 year rule.

You can’t put $17.5K into an individual 401(k) when you only make $1-3K in that business. You can only put in $1-3K.

As far as Roth vs Traditional 401(k), see this article: https://www.whitecoatinvestor.com/should-you-make-roth-or-traditional-401k-contributions/

Unfortunately, that is a complicated decision and involves some guesswork about the future.

Click to expand...

WCI,

My employer only makes our contribution once a year and that is in February or March.  I am setting it up so I have my Simple IRA fully funded by June and am having it transferred to a solo 401k.  I have been at this job for 7 years and had simple IRA open for 5 years so there shouldn't be any problems in doing this right?

My plan was not to put any money into solo 401k, just roll over my Simple IRA so I can do back door ira without pro-rata tax.  That is only reason for me doing solo 401k.  If I do have any 1099 income I will also put that into solo 401k but it will be minimal.

 

 

 

 

 

 

[Zaphod]

I wouldnt put too much emphasis on tax rate in the future, all kinds of things you cannot control for and a lot of guesswork that may turn out to be completely wrong. You may retire early, etc...etc...Plus there are all kinds of ways to get at your money while avoiding RMDs, etc...You can retire early and then do conversions when in a controlled for lower tax bracket living off savings or something. There are lots of tricks. Put it all in tax deferred for now and do some more research on exactly what you want to do and your options to achieve them. Dont over complicate it.

 

I also have municipal bond funds, but its really my emergency/tax/cash stash. For someone at a high marginal rate in a high tax state this is a great return on the cash that isnt immediately destined for somewhere else. Its not investing so much as it is inflation control. It doesnt take much of a tax free return to become an excellent tax equivalent yield, especially in California.

 

I didnt understand the qualified dividend discussion either. RMDs dont discriminate, what comes out is taxed as income.

[PenguinMD]

+1 on the muni fund. Do the exact same thing with a CA muni fund which earns tax-free for the standby/emergency cash. Think it works well if you're in a high marginal rate and a high tax state.

Oops my bad, the qualified dividends only applies for taxable accounts. So after you max all your tax efficient options you're likely to start building a taxable account in which this will matter.

Good luck!

[The White Coat Investor]

Ajeagle6921 wrote:

The White Coat Investor wrote:

Ajeagle6921 wrote:

The White Coat Investor wrote:

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand…

I’m not quite sure what you’re asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I’ll just make a few general comments:

The two of your make $295K- that’s awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I’m not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

Click to expand…

I am actually a W2 working for a small business with 40 employees.  I do a job once a year or so that I can get a 1099 with income of $1,000-$3,000.  Only reason I am wanting to do solo is so I can do back door roth without getting pro-rata tax on it.  I should have mentioned that earlier.

 

Just wanting to get experts opinion and especially your WCI opinion on the plan I have put forth.  Make sure I am not missing anything and I am investing in the right order.

 

We will have $11,000 a year going into backdoor roth ira.  I will have $17,500 going into solo traditional 401k.  Still can’t decide on wife’s 401k roth or traditional.

 

 

Click to expand…

Okay, totally different scenario. If your employer is using a SIMPLE, I doubt you’re going to be able to get your SIMPLE balance to zero each year. I guess you could keep a non-deductible IRA going in the background and hope to convert it in a few years. You can open an individual 401(k) for your SE income, but you’ll need to read up on all the rules for rolling SIMPLEs over like the 2 year rule.

You can’t put $17.5K into an individual 401(k) when you only make $1-3K in that business. You can only put in $1-3K.

As far as Roth vs Traditional 401(k), see this article: https://www.whitecoatinvestor.com/should-you-make-roth-or-traditional-401k-contributions/

Unfortunately, that is a complicated decision and involves some guesswork about the future.

Click to expand…

WCI,

My employer only makes our contribution once a year and that is in February or March.  I am setting it up so I have my Simple IRA fully funded by June and am having it transferred to a solo 401k.  I have been at this job for 7 years and had simple IRA open for 5 years so there shouldn’t be any problems in doing this right?

My plan was not to put any money into solo 401k, just roll over my Simple IRA so I can do back door ira without pro-rata tax.  That is only reason for me doing solo 401k.  If I do have any 1099 income I will also put that into solo 401k but it will be minimal.

 

 

 

 

 

 

Click to expand...

https://www.irs.gov/Retirement-Plans/SIMPLE-IRA-Plan-FAQs-Distributions

 

I think you're right. I think you can pull it out every year. Cool trick.

[jfoxcpacfp]

The White Coat Investor wrote:

Ajeagle6921 wrote:

The White Coat Investor wrote:

Ajeagle6921 wrote:

The White Coat Investor wrote:

Ajeagle6921 wrote:

I had a post a few days ago and got a lot of good advice. I have updated our investment plan with advice given but still need some advice. First off thanks again for all the advice.

Wife income=$125 age=31
My income=$170 age=32

Wife has 401k at work with 3% match with traditional or Roth 401k option

I have simple IRA I am wanting to move to a solo 401k so I can do backdoor Roth without taxation pro rata IRA

Plan:
Max out wife’s 401k to $18k with work match will be $21.5 total. Thinking should do Roth 401 not traditional but want advice.

Max out my IRA to $12.5k with work match will be $17.5 total then convert to Solo 401k so I can do backdoor Roth as tax efficient as possible.

Each do backdoor Roth IRA for $5.5k for a total of $11k in Roth IRA

Max out HSA to $6.5k

This would give us:
$32.5k in after tax Roth accounts
$17.5k in tax deferred solo 401k
$6.5k in HSA
Total is $56.5k a year on retirement savings

We hope to have $30k-$50k a year in additional savings we will put in after tax brokerage funds at Vanguard and also invest in syndicated real estate in the future.

Also will invest almost exclusively in Vanguard ETFs.

Please let me know your thoughts. Thank you again for all the help and info.

Click to expand…

I’m not quite sure what you’re asking. It is certainly easier to respond to specific questions you may have about your portfolios. So I’ll just make a few general comments:

The two of your make $295K- that’s awesome.

Your wife has a match. Be sure to get that.

You have a SIMPLE and presumably are self-employed without employees since you want a solo 401(k). So yes, make that change as soon as you can. Far better.

Not enough info to tell if your wife should do Roth or traditional 401(k), but the general rule is that in peak earnings years (which I assume you are in) is to do tax-deferred. I’m not hearing something that makes you a definite exception to that general rule. Obviously both are good and better than spending the money.

The rest sounds reasonable. Sounds like an adequate savings rate and a low-cost plan. Be sure to work on a written investing policy statement that describes your future behavior, your goals, and your asset allocation.

 

Click to expand…

I am actually a W2 working for a small business with 40 employees.  I do a job once a year or so that I can get a 1099 with income of $1,000-$3,000.  Only reason I am wanting to do solo is so I can do back door roth without getting pro-rata tax on it.  I should have mentioned that earlier.

 

Just wanting to get experts opinion and especially your WCI opinion on the plan I have put forth.  Make sure I am not missing anything and I am investing in the right order.

 

We will have $11,000 a year going into backdoor roth ira.  I will have $17,500 going into solo traditional 401k.  Still can’t decide on wife’s 401k roth or traditional.

 

 

Click to expand…

Okay, totally different scenario. If your employer is using a SIMPLE, I doubt you’re going to be able to get your SIMPLE balance to zero each year. I guess you could keep a non-deductible IRA going in the background and hope to convert it in a few years. You can open an individual 401(k) for your SE income, but you’ll need to read up on all the rules for rolling SIMPLEs over like the 2 year rule.

You can’t put $17.5K into an individual 401(k) when you only make $1-3K in that business. You can only put in $1-3K.

As far as Roth vs Traditional 401(k), see this article: https://www.whitecoatinvestor.com/should-you-make-roth-or-traditional-401k-contributions/

Unfortunately, that is a complicated decision and involves some guesswork about the future.

Click to expand…

WCI,

My employer only makes our contribution once a year and that is in February or March.  I am setting it up so I have my Simple IRA fully funded by June and am having it transferred to a solo 401k.  I have been at this job for 7 years and had simple IRA open for 5 years so there shouldn’t be any problems in doing this right?

My plan was not to put any money into solo 401k, just roll over my Simple IRA so I can do back door ira without pro-rata tax.  That is only reason for me doing solo 401k.  If I do have any 1099 income I will also put that into solo 401k but it will be minimal.

 

 

 

 

 

 

Click to expand…

https://www.irs.gov/Retirement-Plans/SIMPLE-IRA-Plan-FAQs-Distributions

 

I think you’re right. I think you can pull it out every year. Cool trick.

Click to expand...

That is correct. As long as you've had the SIMPLE open at least 2 years, you can roll over to another account any time you want without penalty. You are 100% vested and in control at inception.