Missed solo 401k deadline, what are my options?

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Topic Author
Pokerguy123
Posts: 23
Joined: Tue Feb 05, 2019 1:22 pm

Missed solo 401k deadline, what are my options?

Post by Pokerguy123 » Mon Jan 13, 2020 8:30 pm

Hey Bogleheads,

I am self employed, and have been slowly learning about finances, taxes, retirement plans, etc. I had spent time researching the correct plan for me, and the best brokerage. I chose a solo 401k including a roth option, from E-trade, and over-nighted the documents, but they didn't open the account until Jan 4th. My fault for waiting until so close to the deadline.

Anyways, what are my best options now? Should I open a SEP-IRA since the deadline hasn't reached. I did read online that I can't have a SEP-IRA and solo 401k. Is that correct? Should I just open a traditional IRA, even though I will be pretty limited on how much I can contribute?

My income for 2019 was $57,000. I would expect future income to be about $80,000 on an average year. This is my first year opening a retirement account, and I've been self employed for 11 years, so I was hoping for higher contribution limits so that I can move some of that money over.

Thanks in advance.

Spirit Rider
Posts: 12264
Joined: Fri Mar 02, 2007 2:39 pm

Re: Missed solo 401k deadline, what are my options?

Post by Spirit Rider » Mon Jan 13, 2020 9:10 pm

First a clarification. The relevant date is the adoption date, not any account opening date. What was the adoption date of the one-participant 401k plan?

You can not "maintain" a 5305-SEP IRA plan for the same tax year you "maintain" a 401k plan. A SEP IRA plan is maintained for a tax year only when you make contributions for that tax year. The year of when the contribution is actually made is not relevant. A 401k plan is maintained from adoption to termination.

Short answer. You can adopt a SEP IRA plan, open an account and make a contribution for the 2019 tax year up until your tax filing deadline (4/15/20) including extensions (10/15/20). This will not interfere with your Individual 401k plan from E-Trade if adopted in 2020.

In fact, I suggest you adopt your SEP IRA plan, open and make 2019 tax year contributions to the SEP IRA account at E-Trade. Then you can immediately rollover the SEP IRA to your E-Trade Individual 401k. This will allow you to do Backdoor Roths if necessary and desired.

Topic Author
Pokerguy123
Posts: 23
Joined: Tue Feb 05, 2019 1:22 pm

Re: Missed solo 401k deadline, what are my options?

Post by Pokerguy123 » Tue Jan 21, 2020 6:22 pm

Spirit Rider wrote:
Mon Jan 13, 2020 9:10 pm
First a clarification. The relevant date is the adoption date, not any account opening date. What was the adoption date of the one-participant 401k plan?

You can not "maintain" a 5305-SEP IRA plan for the same tax year you "maintain" a 401k plan. A SEP IRA plan is maintained for a tax year only when you make contributions for that tax year. The year of when the contribution is actually made is not relevant. A 401k plan is maintained from adoption to termination.

Short answer. You can adopt a SEP IRA plan, open an account and make a contribution for the 2019 tax year up until your tax filing deadline (4/15/20) including extensions (10/15/20). This will not interfere with your Individual 401k plan from E-Trade if adopted in 2020.

In fact, I suggest you adopt your SEP IRA plan, open and make 2019 tax year contributions to the SEP IRA account at E-Trade. Then you can immediately rollover the SEP IRA to your E-Trade Individual 401k. This will allow you to do Backdoor Roths if necessary and desired.
Hey Spirit Rider,

Thank you for this help. I called Etrade, looking to make a Sep Ira, and then roll it over, but you were correct, the account wasn't made until Jan 4th, but the plan was adopted for the tax year 2019. So I will be able to contribute normally. Thanks again!!! :sharebeer

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