Money Matters
als1982
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Help deciding retirement options?
Hi everyone! Now that H is self employed, we need to reconfigure how we're saving for retirement.
I have a 403b and am currently contributing the max amount. In past years, I've done this pre-tax in order to keep our income under the MAGI threshold to qualify for ROTHs. I will keep coming contributing the max, but my first question is whether I should start contributing after tax (I can make changes at any time). Second question, if I change my 403b to a ROTH, can I still contribute $5,500 to a personal ROTH at Edward Jones or Charles Schwab?
As for H's retirement accounts, we've looked into a SEP IRA, which appear to have a limit of 25% of your income or $53,000, whichever is less. Can someone confirm whether that's pre-tax and will reflect on our MAGI? And if so, if he can have both this account AND a separate ROTH?
All of this said, we have zero clue what he's going to make this year, but we have decided that any income is first going to retirement and the leftover will go to payoff the house.
I have a 403b and am currently contributing the max amount. In past years, I've done this pre-tax in order to keep our income under the MAGI threshold to qualify for ROTHs. I will keep coming contributing the max, but my first question is whether I should start contributing after tax (I can make changes at any time). Second question, if I change my 403b to a ROTH, can I still contribute $5,500 to a personal ROTH at Edward Jones or Charles Schwab?
As for H's retirement accounts, we've looked into a SEP IRA, which appear to have a limit of 25% of your income or $53,000, whichever is less. Can someone confirm whether that's pre-tax and will reflect on our MAGI? And if so, if he can have both this account AND a separate ROTH?
All of this said, we have zero clue what he's going to make this year, but we have decided that any income is first going to retirement and the leftover will go to payoff the house.
HeartlandHustle | Personal Finance and Betterment Blog
Re: Help deciding retirement options?
However, instead of a SEP IRA, have him look at opening a solo 401(k). You can do a low-to-no fee version through Fidelity, Schwab, Vanguard, etc. That will allow him to defer 18K pre-tax, regardless of what his net revenue ends up being. As the employer, he will also be able to make employer contributions too, if his revenue is high enough (I forget the exact formula, but it's based on a percentage of net revenue).
You can also pay a higher fee and use an administrator that will allow him to do a "mega backdoor roth" within his personal 401(k) plan. Here is a guy who has one and serves as his own plan administrator:
https://thefinancebuff.com/executing-mega-backdoor-roth-in-solo-401k.html
Basically, some 401(k) plans allow employees to make after-tax contributions up to $53K/year. You then do an in-plan rollover to send that money to your IRA, and it grows like Roth money. It's a huge deal if your plan has it, and I am campaigning hard to add this into my firm's plan.
Since your H is both employer and employee, he would be able to do the mega backdoor roth if his plan allows it. Fidelity and Vanguard's plans are off-the-shelf, and I'm pretty sure they don't permit it. So he would probably need to pay a higher fee from a different plan administrator that allows for more customized plans.
Now if his net revenue is high enough to hit the $53K limit through employer contributions alone that will be much cheaper and easier to administer. But do know the mega backdoor roth is an option within more customized plans.
In terms of your 403(b), if you change those contributions to Roth contributions then yes you can still contribute to a Roth IRA. The annual limits are based on the type of account you have (401K/403b vs. IRA), not the tax treatment of the money going in.
**Not tax/legal advice.