New to Investing Roth IRA or Solo 401K for Spouse?

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PineForest
Posts: 11
Joined: Thu Jan 23, 2020 5:12 pm

New to Investing Roth IRA or Solo 401K for Spouse?

Post by PineForest »

New to investing and to this forum. Appreciate all the valuable information. So much to learn that I've never known about before.

My wife and I are just starting to invest even though we're in our early 40's.

She has $6,000 to invest now and hopes to add $500 from now on per month to her investment. We are wondering if she should start a ROTH IRA with this money or start a solo 401K (she is self-employed). I get that the difference is paying taxes now or later, but I'm not sure how I would know which option would be more advantageous for us.

We are concerned about market crashes, but suspect retirement is at least 20 years away for us, so are in it for a medium to long haul.

Would appreciate any thoughts and/or advice. Thanks!
pkcrafter
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Re: New to Investing Roth IRA or Solo 401K for Spouse?

Post by pkcrafter »

Welcome,

You have started two posts, but both would generate better replies if there was more information.

You can edit your posts using the pencil icon in the upper right corner of the post.

viewtopic.php?f=1&t=6212

Income? Total invested now? Tax bracket, etc.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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FiveK
Posts: 10544
Joined: Sun Mar 16, 2014 2:43 pm

Re: New to Investing Roth IRA or Solo 401K for Spouse?

Post by FiveK »

PineForest wrote: Thu Jan 23, 2020 10:19 pm New to investing and to this forum. Appreciate all the valuable information. So much to learn that I've never known about before.

My wife and I are just starting to invest even though we're in our early 40's.

She has $6,000 to invest now and hopes to add $500 from now on per month to her investment. We are wondering if she should start a ROTH IRA with this money or start a solo 401K (she is self-employed). I get that the difference is paying taxes now or later, but I'm not sure how I would know which option would be more advantageous for us.
You can't "know" now, but you can make a stab at Estimating future marginal tax rate and proceed accordingly.

As pkcrafter noted, more information might lead to a different response, but reading between the lines of your post you might
- both make 2019 traditional IRA contributions now and deduct those on the 2019 tax return due by April 15, 2020, and
- both make 2020 traditional IRA contributions as cash flow allows and deduct those on the 2020 tax return due by April 15, 2021, and
- have your wife establish a solo 401k and contribute to it during the year as cash flow allows.

See Prioritizing investments and Investment Order for general suggestions.
Topic Author
PineForest
Posts: 11
Joined: Thu Jan 23, 2020 5:12 pm

Re: New to Investing Roth IRA or Solo 401K for Spouse?

Post by PineForest »

pkcrafter wrote: Fri Jan 24, 2020 12:35 am Welcome,

You have started two posts, but both would generate better replies if there was more information.

You can edit your posts using the pencil icon in the upper right corner of the post.

viewtopic.php?f=1&t=6212

Income? Total invested now? Tax bracket, etc.

Paul
Thanks for the tip and link. I'll need to do a little research/inventory on everything that is recommended to include.
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