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Concerned about investing more into my 457b, but where do I put that money now?

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  • Concerned about investing more into my 457b, but where do I put that money now?

    I'm ending my 4th year in my career and have been maxing out my 403b and 457b with my employer each year, but after having a recent meeting with the Chairman of our BOD, I'm hesitant to continue to currently put more money into my non-governmental 457b because who knows what will happen to healthcare going forward. I have roughly $80k in there now and don't want to put more in there, but am looking for the best avenue to redirect funds I was placing in there. My investment set up has been:

    1 - 403b - Max out
    2- 457b - Max out
    3 - 401k - Employer matches 403b contributions here
    4 - 457f - Employer just places money in here
    (All investments in the funds above are Vanguard funds split among VIIX, VEMPX, VFPX, VBMPX because that's what available to me through Empower.)
    5 - Taxable account with Vanguard (just started this 2 months ago) - just have VTSAX in here

    I also have 529 accounts set up for my kids for college (estimated for full in-state tuition) and really I started the taxable account as kind of a buffer for possible private college costs or wedding. I haven't done an HSA because we've had some big health expenses the last couple of years and I liked the predictability of our PPO. I have yet to do a backdoor Roth for myself or my wife and my wife also does occasional 1099 work. Would a good plan be to place the money I was putting into the 457b into 2 backdoor Roth accounts and then the remainder in a taxable account? I'd then pick appropriate funds to put in each account based on their tax benefit. I know I'd lose the tax benefit initially of the 457b, but having more flexibility and security the money is actually mine and can't be lost to creditors if our health system goes down is more valuable to me. Thanks for the input and let me know if there's more clarification needed

  • #2
    Originally posted by Txanesthesia View Post
    Would a good plan be to place the money I was putting into the 457b into 2 backdoor Roth accounts and then the remainder in a taxable account?
    yup

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    • #3
      How about a solo-k for your wife, too?
      Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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      • #4
        Originally posted by jfoxcpacfp View Post
        How about a solo-k for your wife, too?
        I'd love to just unfamiliar with it. She has only made a couple thousand dollars ($2-4,000) each year, so I didn't know if there were limits on how much we could put in there

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        • #5
          Originally posted by Txanesthesia View Post

          I'd love to just unfamiliar with it. She has only made a couple thousand dollars ($2-4,000) each year, so I didn't know if there were limits on how much we could put in there
          Does she have a day job with a 401k/403b that she maxes out?
          Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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          • #6
            Originally posted by jfoxcpacfp View Post

            Does she have a day job with a 401k/403b that she maxes out?
            No, she used to work full time as 1099, but now just stays home and occasionally works. She never contributed to a retirement account and currently doesn't have that option

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            • #7
              she can put up to $19,500 in that i-401k this year. she doesn't even come close to that limit. do it today

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              • #8
                Originally posted by JBME View Post
                she can put up to $19,500 in that i-401k this year. she doesn't even come close to that limit. do it today
                So lets say she makes $5,000 this year as a 1099 independent contractor, she can still contribute $19,500 to a i-401k for this year? If so, that sounds fantastic but I just want to make sure I don't run into any legal issues by contributing too much. I found this on Nerd Wallet

                2. Solo 401(k)

                Best for: A business owner or self-employed person with no employees (except a spouse, if applicable).

                Contribution limit: Up to $57,000 in 2020 (plus a $6,000 catch-up contribution for those 50 or older) or 100% of earned income, whichever is less. To help understand the contribution limits here, it helps to pretend you’re two people: An employer (of yourself) and an employee (also of yourself).
                • In your capacity as the employee, you can contribute as you would to a standard employer-offered 401(k), with salary deferrals of up to 100% of your compensation or $19,500 (plus that $6,000 catch-up contribution, if eligible), whichever is less.
                • In your capacity as the employer, you can make an additional contribution of up to 25% of compensation.

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                • #9
                  no, if she makes $2k she can contribute all of that. If she makes $5k she can contribute all of that. If she makes $19.5k she can contribute all of that. She CANNOT contribute more than she makes though. So you can't take some of your earned money and put it in her i401k. The only type of retirement account where someone else other than you or your employer can contribute to it is a Roth IRA (that's why they call it a spousal IRA)

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                  • #10
                    Originally posted by JBME View Post
                    no, if she makes $2k she can contribute all of that. If she makes $5k she can contribute all of that. If she makes $19.5k she can contribute all of that. She CANNOT contribute more than she makes though. So you can't take some of your earned money and put it in her i401k. The only type of retirement account where someone else other than you or your employer can contribute to it is a Roth IRA (that's why they call it a spousal IRA)
                    To clarify, she can contribute (net profits - 1/2 FICA taxes). Iow, she might have some related expenses, which would reduce the allowable contribution. Then, she would have FICA taxes of 15.3% on the profits. Finally, 1/2 of those FICA taxes w/b deductible and would reduce the amount upon which she can calculate her contribution.
                    Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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                    • #11
                      “I'd lose the tax benefit initially of the 457b”

                      Regarding the backdoor Roth’s, both of you have lost substantial future tax benefits. Use it or lose it.
                      Right now you can squirrel away $24k tax free (sarcastic, you already were taxed) in the Roth’s.
                      2019 and 2020 for each @ 6k. 2019 deadline is 7/15.

                      Those future tax free growth are valuable. Fill the Roth’s before a taxable for 2019 and 2020 if you can swing it so you don’t lose it! Roth’s before taxable.

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                      • #12
                        Originally posted by Tim View Post
                        “I'd lose the tax benefit initially of the 457b”

                        Regarding the backdoor Roth’s, both of you have lost substantial future tax benefits. Use it or lose it.
                        Right now you can squirrel away $24k tax free (sarcastic, you already were taxed) in the Roth’s.
                        2019 and 2020 for each @ 6k. 2019 deadline is 7/15.

                        Those future tax free growth are valuable. Fill the Roth’s before a taxable for 2019 and 2020 if you can swing it so you don’t lose it! Roth’s before taxable.
                        If I already filed my 2019 taxes, can I still contribute to 2019 back door Roths? Would I have to re-file taxes or could it be done with my 2020 taxes?

                        Comment


                        • #13
                          Originally posted by Txanesthesia View Post

                          If I already filed my 2019 taxes, can I still contribute to 2019 back door Roths? Would I have to re-file taxes or could it be done with my 2020 taxes?
                          Yes you can do it. Form 8606 needs to be sent in.
                          https://turbotax.intuit.com/tax-tips...iras/L7iVxrgTs
                          I’ll defer to others. I don’t think 1040 needs amended. Corrections welcomed.

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                          • #14
                            Fine to make changes, but what exactly do you and your Chairman think is going to adversely affect healthcare but not other industries?

                            Looks to me like healthcare is both essential and ripe for new innovations.

                            Comment


                            • #15
                              Originally posted by Txanesthesia View Post

                              If I already filed my 2019 taxes, can I still contribute to 2019 back door Roths? Would I have to re-file taxes or could it be done with my 2020 taxes?
                              No need to amend. Just file standalone 8606(s) for this year. You’ll fill in p1 only and report 2019 and 2020 conversions on p2 (assuming you contribute/convert both yrs now)
                              Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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