Deductible IRA Contribution and Rollover to Solo 401k

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natureexplorer
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Deductible IRA Contribution and Rollover to Solo 401k

Post by natureexplorer » Wed Apr 01, 2015 2:38 am

Can I make a 2014 $5.5k Deductible IRA contribution and immediately roll it over a Solo 401k?

I'm thinking of doing this at Fidelity where I already have a Solo 401k. I currently have a "Rollover IRA" at Fidelity with a zero balance. Can I use this "Rollover IRA" account for the deductible contribution or do I need to open a new "normal" IRA account?

There are two reason, why I would rollover to a Solo 401k:

1. Simplicity - so as to keep the funds in just one account. I currently have no IRA balances. (My wife does have an IRA balance. Is that relevant?)

2. I'd like to preserve the ability to do future Backdoor Roth IRA contributions.

JDDS
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Re: Deductible IRA Contribution and Rollover to Solo 401k

Post by JDDS » Wed Apr 01, 2015 8:22 am

You should not make contributions into a Rollover IRA from my understanding. Have you confirmed you're eligible to deduct the entire 2014 IRA contribution on your 2014 taxes?

natureexplorer
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Location: Houston

Re: Deductible IRA Contribution and Rollover to Solo 401k

Post by natureexplorer » Wed Apr 01, 2015 9:38 am

JDDS wrote:Have you confirmed you're eligible to deduct the entire 2014 IRA contribution on your 2014 taxes?
Yes.

Spirit Rider
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Re: Deductible IRA Contribution and Rollover to Solo 401k

Post by Spirit Rider » Wed Apr 01, 2015 10:45 am

JDDS' comment is generally true. You should not co-mingle IRA contributions with a Rollover IRA. This is to preserve the ERISA bankruptcy protections of qualified funds. However, in this case there are no rollover funds left in the account.

For this reason there should be no downside to using the Rollover IRA as a temporary container for the IRA contributions. While a smart custodian could restrict Rollover IRA rollovers to those coming from ERISA accounts, but I doubt any of them do.

You should just call Fidelity and ask them. Even if you have to open a new IRA, it is no big deal. After some time the zero balance Rollover IRA will go away if it has no activity. That might be one reason to leave it alone and let it age out.

Nothing you do with your IRAs affects your wife's. They are Individual accounts.

natureexplorer
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Location: Houston

Re: Deductible IRA Contribution and Rollover to Solo 401k

Post by natureexplorer » Wed Apr 01, 2015 10:49 am

Yeah, opening a new and "proper" IRA at Fidelity should be no problem at all. I will just do that to avoid any possible problems.

Is the rest of what I describe sensible? To immediately rollover to a Solo 401k? Can this be done online at Fidelity?

Spirit Rider
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Re: Deductible IRA Contribution and Rollover to Solo 401k

Post by Spirit Rider » Wed Apr 01, 2015 1:58 pm

You can do a Roth conversion from an IRA online. I do not know if you can do a IRA -> Solo 401k online. 401k account activities usually seem to involve paper work.

Also, if my memory is correct, you couldn't even do the IRA -> Roth conversion immediately. You had to wait some number of days after the IRA deposit to do the Roth conversion.

Here again questions like this should really be addressed to your provider.

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