Trying to take advantage of getting a new job and side gig

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
cmlim
Posts: 13
Joined: Fri Nov 07, 2014 10:48 am

Trying to take advantage of getting a new job and side gig

Post by cmlim » Tue Mar 13, 2018 9:23 pm

Hi all,

After a brief period of job instability due to a company merger, my wife and I have landed new positions are different companies. We gave ourselves a few weeks before starting our jobs so we can decompress and catch up on a lot of home and financial stuff we have left unattended for too long.

For background:
Combined family income >300k
We bith max out 401k each year
I do a Backdoor Roth each year (wife does not due to a rollover IRA she has)
Contribute to kids' 529 to state income tax break maximum
Because of the job situation, I picked up a consulting position on the side for a few hours a week (~8-10k/year as a sole proprietor, I do have an EIN).
Will, estate plan, etc. were done in 2016
Debt is mortgage only, no car payments, student loans, etc.
Term life insurance already setup for both of us

Now that we're on the cusp of new jobs, I'm looking at how to best take advantage. Based on what I've been done and researching on the forum, I want to do the following:

1.) Transfer my wife's existing rollover IRA to her new company's 401k
2.) Have her start making non-deductible IRA contributions to prepare for a backdoor Roth
3.) Open a solo 401k for the side gig income, now I do want to confirm the following:
a.) I plan on maxing out my 401k employEE contribution with my W-2 job, so I am going to make only the employER contributions here
b.) Gross income is over the SS cutoff, so I will only be paying the Medicare tax
c.) EmployER contribution is limited to 20% of the post tax income
d.) I really dislike my previous employer's 401k because of the high ER funds, so I was planning on transferring those assets into my solo 401k

Did I get all that right? Is there anything else I should be thinking about? I was looking at the non-Roth, after-tax solo 401k contribution, but it looks like that the provider would need to accept after-tax contributions and over an in-service withdrawals.

I'm scratching my head to see if there's any other financial planning I should be doing.

TIA

CurlyDave
Posts: 685
Joined: Thu Jul 28, 2016 11:37 am

Re: Trying to take advantage of getting a new job and side gig

Post by CurlyDave » Tue Mar 13, 2018 11:53 pm

Why is it beneficial to transfer a 401(k) to an IRA, and why is it better to rollover one 401(k) into another instead of into an IRA?

With an IRA you have many more choices than a 401(k).

User avatar
Duckie
Posts: 5889
Joined: Thu Mar 08, 2007 2:55 pm

Re: Trying to take advantage of getting a new job and side gig

Post by Duckie » Wed Mar 14, 2018 7:54 pm

cmlim wrote:Did I get all that right?
It looks right to me.

CurlyDave wrote:Why is it beneficial to transfer a 401(k) to an IRA, and why is it better to rollover one 401(k) into another instead of into an IRA?

With an IRA you have many more choices than a 401(k).
He want to use the Backdoor Roth IRA method. Because of the pro-rata rule, in order to do that properly his wife has to "hide" her Rollover IRA by moving it to her 401k and since he wants out of his old 401k he's planning to move it to his new solo 401k. His solo 401k is probably at a brokerage that has plenty of inexpensive index funds.

StealthRabbit
Posts: 119
Joined: Sat Jun 13, 2009 1:25 am

Re: Trying to take advantage of getting a new job and side gig

Post by StealthRabbit » Wed Mar 14, 2018 8:17 pm

.Re: Trying to take advantage of getting a new job and side gig
For the many ‘future readers’ who may not have $300k combined income....

For many yrs I lived on my PT job income and 100% of my FT job went into retirement savings / alternative investments.

Thus... I was able to raise a family on a single hourly wage earner income (never over $100k, 90% yrs were under$40k/ yr) & retire pre age 50.

Can be done. (Easily)
Systematic savings (more than you spend)
$100/ month food and entertainment
$35 car that burns free cooking oil (since 1976)
Don’t spend more than you make.
Pay cash. If you don’t have the cash.... you don’t need to buy it.

I have always made it a point to give more away than I spend, so.... you get by on less.
Many avenues to that objective. We use Donor Advised Fund, Family Foundation, planned giving.
If you don’t have it accessible.... you are less likely to spend too much.

User avatar
Earl Lemongrab
Posts: 5279
Joined: Tue Jun 10, 2014 1:14 am

Re: Trying to take advantage of getting a new job and side gig

Post by Earl Lemongrab » Thu Mar 15, 2018 1:00 pm

Have you checked to see if either company restricts contributions for new employees? I believe they can make you wait up to a year.

How are the options in your new plan? If not great, then you could consider contributing less (get any match of course) and more to the solo plan.

Be sure your new solo plan accepts rollovers (meaning not Vanguard).
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

Post Reply