You can probably get an individual 401(k) that allows in service conversions but it might require a customized plan. If you understand the Backdoor Roth IRA, these little tweaks are no big deal. Contribution limits for Roth IRAs. Great post. Some brokerages allow you to do the contribution, conversion, and investments steps all in the same day. They transfer the pre-tax to the solo 401(k) and send him a check for $200K. You can do step 2 basically immediately after step 1. I do this the very next day after I make the contribution. When you fill out your taxes, you do own up to that 1099 but it gets negated by the 8606? I contributed $5500 to a Vanguard traditional IRA in December and then shortly after converted it to a Roth. and also what exactly do you do – step for megaroth- what does the TPA exactly do- full service. Should I hold current amount in traditional IRA then add the additional $5500 for this new year in a few months and convert everything to a Roth IRA later in the year? Whoever told you that is ignorant at best. If I do need to open a traditional IRA, do I fund it myself from my bank account or does it need to be a direct payroll deduction from my employer? For Postmates, drivers are paid out for the deliveries they complete according to the formula for their city. And then again, in 4/2017, you indicate that you made $5,500 contribution. Hi WCI. Am I thinking about this correctly? I did this the first time this year and it didn’t take more than 15 mins. Get rid of any SEP-IRA, SIMPLE IRA, traditional IRA, or rollover IRA money. Remember the goal isn’t to reduce taxes, it is to maximize your after-tax money (at least on a risk-adjusted basis. 7) 02 Roth 401(k)s and Roth IRAs are retirement savings accounts that allow you to contribute with after-tax dollars but take tax-free withdrawals in retirement. So on Day 2, you go to your traditional IRA and hit the “convert to Roth IRA button”. Net Result: paid tax on after-tax 401k contributions and non-deductible TIRA, but gains and distributions on that 40k per year will be tax free from the Roth IRA after a 5 year waiting period. Would it be worth using some of the SEP contribution to contribute to a back door Roth for 2018? Will it be 33% of 130-52 =78K? This post has stimulated my thinking…I’ve got, 1) 125k SEP IRA (zero investment gains) I don’t plan on being late in 2018 . In fact, if you bring money in from an outside bank, it might take a whole week as Vanguard waits for the money to “settle” before letting you convert it. I have no outstanding Traditional IRAs (I previously rolled them over into my 401k) so I can convert to Roth at any time. That year. Line 1 is your non-deductible contribution. This would in turn require that one roll that traditional IRA money back into the 401(k) before doing a “standard” backdoor Roth, in order to not be hit by that, distinct pro rata rule. If you automatically transfer funds from a bank account to your Roth IRA, if you DON’T specify the year, most financial providers will assume you want it to go to the current calendar year. Right now if you converted you’d owe about $5K. Great thoughts — this was a fun discussion we had at the company a few months ago, here’s some things I think you’re missing: I think you’re adding a few extra steps with the in-plan withdrawals to a Traditional IRA for individual 401(k)s. With the new (post ATRA) in-plan conversion options for 401(k)s, you can save a step: http://www.irs.gov/pub/irs-tege/forum13_roth_conv_opps.pdf, “This means that all salary deferrals, any other employee contributions and all vested employer contributions made to your account, plus the earnings, may now be converted to a designated Roth account within that same plan.” – Slide 4, “And with the new within plan Roth conversion rules, after the employer contribution of $34,000 is made to the plan, you can convert it to a designated Roth account. but I still don’t get it. Am I correct? Great presentation by the way. While it is true that this money won't grow at nearly the same rate as it … Those should be pre-tax. This is a great question to ask my TPA – I’ll let you know as soon as I get a reply. Notice how there is no place on the form to put the date when you made the contribution or the date when you made the conversion. Be sure the person you're asking understands you're not talking about Roth contributions, but contributions above and beyond the $17,500 limit. Are you saying you can make a $52K direct Roth contribution? 5) 0 Your Roth IRA contributions will need to go through the “backdoor” many times as you build your portfolio. You can still convert it now. So either they did/said something dumb or you misunderstood. Is there a way that avoids IRS risk in isolating the basis and converting it to a Roth? The conversion step will obviously be in 2019, but that’s fine. No age limit. You can have an individual 401K at Vanguard, although you’ll probably need to open one elsewhere to do an initial rollover of your SEP since Vanguard’s doesn’t accept them. You can delete this post after you read it. But after that, adding an IRA to your retirement mix can provide you with more investment options and possibly lower fees than your 401(k) charges. I”m not sure what you mean by an IRA through a former employer. To me, the 457 might have the advantage tax-wise as most of us attendings make more than we will withdraw in retirement and expect our current marginal tax rate to be higher than our retirement rate (though we may be wrong). The IRS clarified in early 2018 that no waiting period is required between the contribution and conversion steps of the Backdoor Roth IRA and essentially has given its blessing on the whole process. However, by Tuesday morning (January 5th) I was able to do the conversion step. Line 6 – This is the line that triggers the pro-rata issue. If you rollover the whole SEP, you will eventually pay taxes twice on part of the money. I am hoping she either a) Starts up her own business earning at least $14k per year so she can open a individual 401k or b) Goes back to work as a teacher and opens a 403b that accepts rollovers. 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