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Roth conversion vs 403b ; plus other tax q\'s for an upcoming grad.

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  • Roth conversion vs 403b ; plus other tax q\'s for an upcoming grad.

    I am a longtime reader first time poster that would like to start off by thanking the WCI and Forum posters for everything you have done for me and my family.

    That said, I am graduating from residency later this month and moving from FL (no state income tax) to CA (high state income tax). I was wondering if I should convert my current 403b (combined 75k including wife) to a roth IRA? Our expected total income for the year would be around 185k and the conversion would throw us into the 28% tax bracket. Are these taxable by state? Should I do this before I move to CA? Would it make a difference? Also, I currently have a 403 b and max it out at 17k a year and plan on contributing the max to a backdoor (Roth 5.5 k each) . Can I open any other tax deferred accounts to bump down my taxable income.

    Thanks again for everything

     

     

  • #2
    Can you anything (moonlighting, surveys, whatever) to get some 1099 income? Then you could open a solo-401k, and rollover your 403b into it. Then you will keep it all tax-deferred, can invest as you see fit, and will encounter no tax issues when you do backdoor Roths.

    That is my plan. I just opened my solo-401k with Fidelity and will roll over my 403b/401a next month.

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    • #3
      Wouldn't you still be taxed for converting to roth at the current marginal tax rate for the year? Would you still have a max of 17k to contribute? Would the state taxes apply?

       

       

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      • #4




        Can you anything (moonlighting, surveys, whatever) to get some 1099 income? Then you could open a solo-401k, and rollover your 403b into it. Then you will keep it all tax-deferred, can invest as you see fit, and will encounter no tax issues when you do backdoor Roths.

        That is my plan. I just opened my solo-401k with Fidelity and will roll over my 403b/401a next month.
        Click to expand...


        If you have 1099 income, but that 1099 income is far less than your 403b amount, you can't convert it all can you?

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        • #5


          If you have 1099 income, but that 1099 income is far less than your 403b amount, you can’t convert it all can you?
          Click to expand...


          Yes, you can roll it all over into your SOLO-k. What you do is:

          • Set up a SOLO-k and contribute 20% of your net profits from 1099 income into it

          • Roll your 403b into the established SOLO-k.


          This is not any different from rolling your 403b into the 401k that you have just established at your new employer and have just begun funding.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6




            Wouldn’t you still be taxed for converting to roth at the current marginal tax rate for the year? Would you still have a max of 17k to contribute? Would the state taxes apply?
            Click to expand...


            hmmm - just saw you never got an answer. consultpsych's suggestion was to open a SOLO-k if you have (or will have) any IC income. You would be rolling a pre-tax account into a pre-tax account, so no taxes would be due. You could hire your wife and open a SOLO-k for her, too. You still have time to do this before the eoy and can then contribute to a back-door Roth IRA.

            However, on 2nd reading of your original post, if you are "only" at $185k AGI, then you and your wife can contribute 90% of $11k, or $9,900, directly to your Roth IRAs and only $1,100 through the back-door.

            State taxes wouldn't apply to a rollover to a SOLO-k, either.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              do all 401K accept 403b conversions?  And as noted above, this would NOT be a taxable event, correct?  If given the option of conversion to SoloK or 401K, is there any difference/better option?  Thanks

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              • #8




                do all 401K accept 403b conversions?  And as noted above, this would NOT be a taxable event, correct?  If given the option of conversion to SoloK or 401K, is there any difference/better option?  Thanks
                Click to expand...


                No, they don't. The plan provider has complete discretion. Read the SPD (Summary Plan Description) or contact your HR dept. to find out if yours does.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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