MFJ, 22% marginal tax bracket
Max his 401k
Max his Roth IRA
Max her Spousal IRA / Roth IRA (to stay at the top of 0% LTCG bracket)
Company stock that needs to be diversified: ~80k NQSO expire in 2025-2027, ~60k in old ESPP/RSU shares before I started selling ASAP with ~25% (15k) gain
Wife is starting a part-time gig from home (not real-estate), with no employees and anticipated annual income of 15k-25k. Our plan is:
- Open a solo 401k through Fidelity
- Deposit as much income as possible: This should be up to 22,500 for personal contribution (after paying payroll / self employment tax), and up to 25% of total profit as a contribution from the business. I anticipate this income limit of around $22,500 + $6,050 employer + 2184 SEP tax = $30,7355 is higher than the business will make, and therefore contributing the maximum to a solo 401k would have zero net income falling through at the end of the Schedule C.
- Withdrawal enough from company stock holdings for other budget needs or to move to other investments (less than from business income), paying income tax or LTCG on those proceeds.
- Use only Roth IRA for her, as spousal traditional IRA would be disallowed because she is eligible for the solo 401k. However, I'm not sure whether she must show net income in order to contribute to a Roth IRA (still need to do some digging)
Any issues with this plan? The concept is essentially to use a Solo 401k and the presence of a sole proprietor business to move money from company stock holdings into a diversified tax-differed vehicle exceeding the current spousal IRA limit.