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No Retirement Account at New Job

Home Retirement Accounts No Retirement Account at New Job

  • Avatar newdoc1 
    Participant
    Status: Resident
    Posts: 47
    Joined: 02/24/2018

    How is it cheap labor if the salary is good? I agree with the skepticism.

    I realize many people prefer to plan out 10 years ahead, but I also think that some people focus too much on the tangibles without actually looking at who they are working with and what environment they will be in.

    #237602 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 2222
    Joined: 02/11/2019

    Without details it is hard to say but are you sure the salary is good?  Do you really know your worth?

     

    You can do a back door roth and if you have a high deductable plan you can invest in an HSA.  Otherwise it is taxable account.  In a low cost tax efficient fund you can do very well.  Not as good as the tax breaks but better then nothing.

    https://www.physicianonfire.com/taxable-account-roth/

    “Never let your sense of morals prevent you from doing what is right.”

    #237611 Reply
    mkintx mkintx 
    Participant
    Status: Physician
    Posts: 77
    Joined: 01/08/2016
    I do have a side gig, but I don’t think I can contribute that much money to it. I mean you can’t put more money in a solo 401k than you earn, right?!

    Click to expand…

    The tax code is based on gross earnings, as I understand it.

    “(g)Limitation on exclusion for elective deferrals

    Notwithstanding subsections (e)(3) and (h)(1)(B), the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds the applicable dollar amount.The preceding sentence shall not apply to the portion of such excess as does not exceed the designated Roth contributions of the individual for the taxable year.”

    As such, it is my understanding that your contribution limit would be based on your total gross income.  Much as you can’t contribute $19,000 a year for each job, but as a total amount, you should be able to contribute to your 401K as long as your gross income is adequate, regardless of where you have that IRA. So, if you open a 401K for your side gig, you should be able to fund it.

    I am not a tax expert, by any means, so anyone can feel free to correct me if I’m wrong.

     

    #237614 Reply
    Avatar newdoc1 
    Participant
    Status: Resident
    Posts: 47
    Joined: 02/24/2018

    O wow. Good to know. I will speak to a CPA. But if its based on gross earnings then I can definitely open up a solo 401k.

    #237618 Reply
    Liked by mkintx
    Avatar newdoc1 
    Participant
    Status: Resident
    Posts: 47
    Joined: 02/24/2018

    Yes, I do know my worth. I got many offers and I interviewed broadly. I did not just pick the first offer I was given. I actually chose this job in the moderate to higher end of offers. I also did not chose simply based on the highest offer given for obvious reasons.

    #237619 Reply
    Liked by Lordosis
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3380
    Joined: 09/18/2018

    You have specific eligibility and contribution limits for each type of plan. Then you have your own eligibility and limitations each year.

    Read this:

    I dont understand 401k employee contribution limits

    #237653 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 730
    Joined: 06/18/2018

    “How is it cheap labor if the salary is good? ”

    Total comp is what you cost the practice, not just salary. You can have a good salary and crappy benefits.

    Many physicians get profit sharing of the fully 56k every year. 15-20k for CME isn’t atypical . Great medical and dental with premiums fully paid by employer. Etc. Benefits can quickly exceed 100k.

    How does your total comp compare to similarly productive peers in your specialty?

    #237667 Reply
    Liked by G, Zaphod
    Avatar newdoc1 
    Participant
    Status: Resident
    Posts: 47
    Joined: 02/24/2018

    Good points everyone. I appreciate the input! I guess I need to start browsing on here more often…lots more to learn.  I’ll just go with the flow and see how things go. Time will tell.

    #237751 Reply
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1905
    Joined: 01/08/2016
    And honestly if there is no serious discussion of partnership track soon,

    Click to expand…

    I was reading along sort of nodding my head and then I got to that line and there was that noise of a needle scratching across a vinyl record.

    Sorry, not trying to pile on.  I’m glad you like your job.

    #237754 Reply
    Liked by Lordosis, 02Sats
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1339
    Joined: 02/15/2016

    While the tax break of the 401k is nice, i think the benefit is being overstated here as compared to a taxable account. I would imagine many physician-owners actually lose money if they have 401ks with many employees (i know we do but we use it for employee retention).
    https://www.kitces.com/blog/overstated-tax-deferral-savings-small-business-401k-cross-tested-profit-sharing-plan/

    #237762 Reply
    Liked by newdoc1
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3380
    Joined: 09/18/2018

    “looking at who they are working with and what environment they will be in.”
    Compensation, location, and the job are the typical three factors. The current lack of tax deferred only impacts one factor. I commend you for strong consideration of the last factor. Low quality job negates the first two. Not every owner is a predator, he might at 3-5 years mentor you to move on and provide mentoring as well. Nothing wrong with being in a good place getting your practice skills adapted to the real world.
    Just work on transitioning to PP and consider you options down the road.

    #237781 Reply
    Avatar loeffy 
    Participant
    Status: Physician
    Posts: 67
    Joined: 08/28/2016

    OP, I share your perspective.  Certainly many around here are pessimist, for good reason, I can be too.  However, the fact is that sometimes in the job hunt there are no perfect job that tick all the boxes, so we have to settle for the best option and make do, or else not have a job at all.  Lack of a 401k for a few years will be so minor in the grand scheme of things regarding your future wealth.

    #237820 Reply
    Liked by newdoc1
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8366
    Joined: 01/09/2016

    One point – I think we’re all so used to backdoor Roths for physicians and this situation is so unusual that we overlooked the fact that @newdoc1’s IRA contribution may be deductible. The reason is that s/he doesn’t participate in another retirement plan. If @newdoc1 doesn’t have a spouse who participates in an employer plan, the IRA contribution is deductible.

    This topic rarely comes up but I just posted a similar answer here.

    I share the concern of others about the compliance testing for this plan. Can’t understand how it can be legal for a qualified plan to allow participation only for partners.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #237829 Reply
    Liked by childay

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