Help me! Backdoor Roth Strategy

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tonsofthorns
Posts: 31
Joined: Sat Feb 11, 2012 1:22 pm

Help me! Backdoor Roth Strategy

Post by tonsofthorns »

Re-looking at this idea and am looking for advice as to if I am missing something or not interpreting the rules correctly:

Background:
Own small business (restaurant) with an existing SimpleIRA with 5 active employees participating.
Have an old Vanguard SEP-IRA that I would like to transfer into a Solo401k in order to participate in Backdoor Roth. Would like to continue with the SimpleIRA. But will transfer money out of it by year end.
Have another business that is passive.

Strategy 1:
Open a Fidelity Solo401k. Do not plan to contribute to it. But would like to roll SEP-IRA (Simple IRA money is rolled into SEP-IRA yearly) into it (will be over $250K). After a year or so, may rollover back to Vanguard as a SOLO 401k, or may not.
For the coming years will do a backdoor roth, since all traditional IRAs are in roths or 401k's.
To open account I could use my tax id for my other company.

Strategy 2:
Open a Guideline 401k with my small business and use for one year. Transfer all SEP-IRA money into it. Then participate in backdoor roth. At the end of year transfer to a Solo401k, and go back to doing a no cost SimpleIRA. Transfer money by the end of year to the Solo401k to continue using backdoor roth.

Prefer strategy 1, as to not have to open a guideline 401k. I do not like their auto enrollment that they require and the $1000 fee with 5 employees for the first year.

Any thoughts to either strategy?

Thanks in advance for your input!
HomeStretch
Posts: 5149
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help me! Backdoor Roth Strategy

Post by HomeStretch »

Regarding Strategy 1 -

You won’t be able to rollover to a Vanguard prototype Individual 401k as their plan does not accept rollovers in.

You said the second business that you will use to adopt the Solo 401k is “passive”. Do you report self-employment income from this business on Schedule C or E?
Topic Author
tonsofthorns
Posts: 31
Joined: Sat Feb 11, 2012 1:22 pm

Re: Help me! Backdoor Roth Strategy

Post by tonsofthorns »

Second business is reported on Schedule E.
Topic Author
tonsofthorns
Posts: 31
Joined: Sat Feb 11, 2012 1:22 pm

Re: Help me! Backdoor Roth Strategy

Post by tonsofthorns »

bump!
fabdog
Posts: 1347
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Help me! Backdoor Roth Strategy

Post by fabdog »

the rules on self employed retirement accounts can be complex. I do not believe you can have a Solo 401(k) and a Simple IRa at the same time.

Use the search box in the upper right to search for threads on maintaining both accounts and also search for posts from SpiritRider

Mike
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