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Question about 401k rollover

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  • Avatar jbardin1 
    Participant
    Status: Resident
    Posts: 23
    Joined: 03/26/2018

    Greetings everyone,

    I just finished residency and have a little over 6000 in a 401K through Wells Fargo.  I am 1099 IC with my new position.  I plan to use Vanguard as much as possible.  They won’t allow a rollover to an individual 401K.  They will allow rollover to an IRA but I want to be able to utilize backdoor roth so the money will have to be moved out of the IRA after it is rolled over.  I have considered moving it to my Roth IRA and paying the taxes but the amount exceeds the annual contribution amount.  I’ve also thought about just leaving it with Wells Fargo.  Any other options or things to consider?

     

    Thank you in advance.

    #228946 Reply
    Avatar pierre 
    Participant
    Status: Resident
    Posts: 211
    Joined: 02/01/2016

    Go with fidelity for your a solo 401k

    #228948 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017

    You’ve discovered one of the pitfalls of Vanguard Solo 401(k)s. They will not accept rollovers from other retirement plans.

    As Pierre mentioned, Fidelity has a very good Solo401(k) plan and offers many low-cost index fund options. And, they allow rollovers of old plans.

    The other option, as you alluded to, is to simply pay the conversion tax to roll your old plan directly into a Roth IRA. This is probably the best option, if your determined to use Vanguard for your Solo 401(k).

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #228950 Reply
    Liked by jbardin1
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1971
    Joined: 02/01/2016

    I agree in principle with @pierre. There is no longer any compelling reason to use Vanguard for a one-participant 401k. I would just expand the options to Etrade, Fidelity and TD Ameritrade. They are all very viable low-cost options depending on personal choice.

    One correction to the original post. Roth conversions or any other IRA rollover never are considered regular IRA contributions and are not included in the contribution limit.

    #228954 Reply
    Liked by pierre, Tim, jbardin1
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4679
    Joined: 01/08/2016

    Greetings everyone,

    I just finished residency and have a little over 6000 in a 401K through Wells Fargo.  I am 1099 IC with my new position.  I plan to use Vanguard as much as possible.  They won’t allow a rollover to an individual 401K.  They will allow rollover to an IRA but I want to be able to utilize backdoor roth so the money will have to be moved out of the IRA after it is rolled over.  I have considered moving it to my Roth IRA and paying the taxes but the amount exceeds the annual contribution amount.  I’ve also thought about just leaving it with Wells Fargo.  Any other options or things to consider?

     

    Thank you in advance.

    Click to expand…

    convert it. this is your lowest tax bracket for a while.

    #228962 Reply
    Liked by Lordosis, jbardin1
    Avatar jbardin1 
    Participant
    Status: Resident
    Posts: 23
    Joined: 03/26/2018

    Thanks all! I will check out the other suggested companies. I didn’t realize the contribution limit didn’t apply to rollovers.

    #229000 Reply

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