Employment Style Change: Any Advice Welcome

[Xile F Investor]

I live with my fiance who is a psychologist being let go from her job at the beginning of the year, because she has not passed her EPPP test yet (but she was close). Over the year she was worked off hours here and there with 2 companies to do contracting work. She has recently been introduced to 2 other companies, and with aspirations to start her own practice one day, we decided that taking the next year to do all contracting work for these four companies would be the plan of action.

What should we take into consideration?
Below is what I've thought of so far:
- figure out how to pay "contractor" taxes
- figure out the health insurance situation
- determine what retirement plan options we have beside IRA (we've maxed out 401K and IRA's the last year)
- determine how to budget for an inconsistent income

any other thoughts and advice are welcome. Thank you!
btw, we get married mid-year, if this has any bearing on the advice being given.

[livesoft]

It may be better to get married on Jan 1 with respect to health insurance. Congrats!

[Xile F Investor]

Thank you livesoft.

I want to find out how long she can get COBRA coverage, they we may discuss getting married by law earlier than the ceremony date.

Another, some what related, consideration I would like to ask about is IRA roll-over. She (fiance) has a Roth IRA and a 457 plan from her current (soon to be ex) job. She recently opened a traditional IRA, because most likely hour income will not allow us to contribute to Roth, so we are going to do a backdoor Roth. Since we plan on converting the T-IRA to a Roth, should we get a 3rd IRA (2nd T-IRA) account to roll-over th3 457? As not to mix the backdoor Roth w/ 457 rollover funds. Or does it not matter and just over complicate things?

[cherijoh]

The IRS counts the sum of ALL IRAs when determining the taxes due on an t-IRA to ROTH conversion. Funds in a 401-k (and I assume 457 plans) don't count. So if SHE is planning to do a back-door ROTH she shouldn't rollover the 457 unless she is willing to pay the taxes. IRA's are held by the individual, so I assume its possible for YOU to do a back door ROTH and not owe any taxes, but not your finance. (I'm single and haven't dealt with this, but I am confident that she would have to pay the taxes if the ROTH conversion is in her account).

For example, if balance in a t-IRA that had been rolled over from 457 plan is $15K and she put $5K after-tax in ANY t-IRA to be converted, she would owe taxes on $5k*($15k/$20k)= $3750 of the $5000 converted. (The $15k is the before tax dollars and $20K is the total IRA balance).

C

[epictetus]

Would encourage her to focus on passing the EPPP so that she can become licensed.

[Xile F Investor]

Would encourage her to focus on passing the EPPP so that she can become licensed.

Thanks epictetus, that's the plan. unfortunately w/ the VA rules, she can not take it again for a year, so the studying will lead up to that point. But in the meantime, we were trying to be strategic w/ the long term goals and current circumstances.