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Research into solo 401k with intent for mega backdoor roth

Home Retirement Accounts Research into solo 401k with intent for mega backdoor roth

  • Avatar jacoavlu 
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    Status: Physician, Small Business Owner
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    Joined: 03/01/2018

    Curious. Does that include an opinion letter from the IRS blessing the plan document?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #211396 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Curious. Does that include an opinion letter from the IRS blessing the plan document?

    Click to expand…

    Yes it does have one

    #211470 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2465
    Joined: 03/01/2018

    Good to know. Sounds like a great option for those wanting to pursue the mega backdoor Roth with self employment income.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #211515 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Mailed in application to Fidelity toady, it included 3 identical applications with the hope to set up a trad 401k, roth 401k, after tax non roth 401k account.  The name of the account must exactly match the 401k trust, so I couldn’t name them with roth, traditional…etc.  I am told when I get the online portal I can make a nickname for the accounts to help keep them straight.  It also included a letter I typed up to explain why there are 3 identical applications, and a 61 page copy of the plan adoption agreement.  Needless to say it was a lot of paperwork to send through the mail.  If you have a fidelity office close to you that would be a preffered option, but unfortunately the closest to me is 60+ miles.

    #211826 Reply
    Avatar deeppizza 
    Participant
    Status: Physician
    Posts: 40
    Joined: 09/30/2016

    Be aware that that if you already have a Fidelity account with online access, the non-prototype solo 401k might not show up.  I turned in my application to a Fidelity office, and it took 3 weeks for me to finally get access.  This was because my personal accounts were associated with my SSN, but the solo 401k is associated with the new EIN.  I had to call Fidelity after I received confirmation in the mail that my account had been opened, and then they had to manually link the 401k account to my personal accounts so that it showed up online.

    #211832 Reply
    Liked by saildawg
    Avatar GasFIRE 
    Participant
    Status: Physician
    Posts: 232
    Joined: 01/08/2018

    Be aware that that if you already have a Fidelity account with online access, the non-prototype solo 401k might not show up.  I turned in my application to a Fidelity office, and it took 3 weeks for me to finally get access.  This was because my personal accounts were associated with my SSN, but the solo 401k is associated with the new EIN.  I had to call Fidelity after I received confirmation in the mail that my account had been opened, and then they had to manually link the 401k account to my personal accounts so that it showed up online.

    Click to expand…

    The exact same thing happened to me when I transferred my Fidelity individual 401k into their non-prototype account. It did take about 3 weeks to complete the process and took human intervention to regain online access. When calling Fidelity about these types of accounts always make sure to be transferred to the retirement department. They’re only available M-F but they’re at least familiar with these types of accounts. With the general desk, it’s hit or miss on whether they can help you or not. I think this is why my TPA was reluctant to have my Roth subaccount opened there too. It’s at TDA and only took 3 days to open from receipt of application.

    #211845 Reply
    Liked by saildawg
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Be aware that that if you already have a Fidelity account with online access, the non-prototype solo 401k might not show up.  I turned in my application to a Fidelity office, and it took 3 weeks for me to finally get access.  This was because my personal accounts were associated with my SSN, but the solo 401k is associated with the new EIN.  I had to call Fidelity after I received confirmation in the mail that my account had been opened, and then they had to manually link the 401k account to my personal accounts so that it showed up online.

    Click to expand…

    I do have my 529 and a small taxable account there, so I imagine I will have to call in and get it set up.  Thanks for the tip

    #211855 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Update account opened within 1 week of submission of paperwork, I did not have to get new login and they integrated seamlessly in my fidelity dashboard.  I was able to rename the accounts to reflect their pretax, roth, and after tax non roth distinctions.

    Funding is an issue as you can only fund with checks in a deposit slip via the mail or you can drop them off at a Fidelity branch (I do not have one near me).  Instead of mailing it in I have attempted to use online bill pay from my personal checking account.  Basically the bank mails the check on my behalf, but saves me the effort of getting postage etc, and I like that it can all be done online at the click of a few buttons.  Hopefully will post in the next few days.

    #215713 Reply
    Liked by Lithium
    Avatar southernerdoc 
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    Status: Physician
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    Joined: 03/10/2019

    Probably best to mail in their form to note whether your contributions are employee deferrals or employer profit sharing contributions.  Yes, they can probably read it from the note section of the check, but do you put 100% faith in that?  You’re supposed to keep records of your contributions anyhow.

    #215791 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016
    Splash Refinancing Bonus

    Probably best to mail in their form to note whether your contributions are employee deferrals or employer profit sharing contributions.  Yes, they can probably read it from the note section of the check, but do you put 100% faith in that?  You’re supposed to keep records of your contributions anyhow.

    Click to expand…

    The slip doesnt have any specifying information on it that would denote PSP vs other.  It is up to me to keep those records regardless of sending a check with the slip or sending it electronically.  The accounts themselves have different account numbers, so it is easy to keep track of.

    #215794 Reply
    Avatar southernerdoc 
    Participant
    Status: Physician
    Posts: 79
    Joined: 03/10/2019

    Probably best to mail in their form to note whether your contributions are employee deferrals or employer profit sharing contributions.  Yes, they can probably read it from the note section of the check, but do you put 100% faith in that?  You’re supposed to keep records of your contributions anyhow.

    Click to expand…

    The slip doesnt have any specifying information on it that would denote PSP vs other.  It is up to me to keep those records regardless of sending a check with the slip or sending it electronically.  The accounts themselves have different account numbers, so it is easy to keep track of.

    Click to expand…

    Fair enough.  Things must be different since you aren’t using the standard Fidelity SE 401(k) account.

    I have often thought of doing this, but elected not to just because of the amount of time involved.  Not sure it’s possible to change in the future, but will revisit at a later date.

    I think even with high income levels, the likelihood of higher tax rates in the future is an almost certainty.  Medicare-for-All may not pass this year or in the next 10 years, but socialized medicine has a high probability of passing by my retirement age and will likely lead to higher tax rates.  For this reason, I moved my Fidelity SE 401(k) to Vanguard to take advantage of Roth contributions.  $19k/year in a Roth (plus catchup when I turn 50) is enough for me — for now.

    Please post back here in a few months and let us know how your experience is going.

    Go Dawgs!

    #215796 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Probably best to mail in their form to note whether your contributions are employee deferrals or employer profit sharing contributions.  Yes, they can probably read it from the note section of the check, but do you put 100% faith in that?  You’re supposed to keep records of your contributions anyhow.

    Click to expand…

    The slip doesnt have any specifying information on it that would denote PSP vs other.  It is up to me to keep those records regardless of sending a check with the slip or sending it electronically.  The accounts themselves have different account numbers, so it is easy to keep track of.

    Click to expand…

    Fair enough.  Things must be different since you aren’t using the standard Fidelity SE 401(k) account.

    I have often thought of doing this, but elected not to just because of the amount of time involved.  Not sure it’s possible to change in the future, but will revisit at a later date.

    I think even with high income levels, the likelihood of higher tax rates in the future is an almost certainty.  Medicare-for-All may not pass this year or in the next 10 years, but socialized medicine has a high probability of passing by my retirement age and will likely lead to higher tax rates.  For this reason, I moved my Fidelity SE 401(k) to Vanguard to take advantage of Roth contributions.  $19k/year in a Roth (plus catchup when I turn 50) is enough for me — for now.

    Please post back here in a few months and let us know how your experience is going.

    Go Dawgs!

    Click to expand…

    I will!  Cant wait for football season hopefully will be a great one for UGA.

    Really the whole point of the megabackdoor roth is to decrease the amount I would have saved in a taxable account anyways, and shift it to roth.  So I look at it as taxable vs roth, roth wins every time.  I still try to get as much pretax deferment as possible, but the self directed 401k lets me shift a lot of money from taxable into a roth account.  This is a great little niche for W2 employed physicians that have 1099 call income.  It actually caused me to shift my whole work schedule to a more efficient plan, with way more vacation.  I may write a post on that someday if it works out how I hope.

     

    #215833 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Bill pay worked!

    Fidelity received the funds yesterday and will take 1 more day as it is a holiday to post.  So a little more than a week in total.

    #217175 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 343
    Joined: 01/24/2016

    Money posted today, after a 10 min call with fidelity I am now able to trade online in all 3 accounts.  I bought FSKAX (would not let me invest in FZROX for some reason) without a problem.  So far so good.

    Just a run down on the steps

    Get documents from discountsolo401k (or other similar company) -> Fill out 3 identical Fidelity non prototype applications (must be the exact name of the 401k trust) -> Log onto Fidelity when they become available and rename them with nicknames (pretax, roth, post tax non roth) -> Fund the accounts with bill pay (or mail a check) -> Call Fidelity to allow you to make trades online -> Buy desired equities etc

     

     

     

    #217537 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1980
    Joined: 02/01/2016

    A form member on BH reported that they were successfully able to do an EFT directly to the routing number and account numbers of their Fidelity Non-Prototype Accounts. I have no independent way to verify that, but it is worth a try.

    NOTE: For others, this does NOT apply to Fidelity’s SE401k plan. Only an independent custom 401k plan that is simply using Fidelity as a custodian for their Non-Prototype Accounts. Your only options with Fidelity’s SE401k plan is to mail a check or EFT to a CMA in the name of the business and call and do a phone transfer to the SE401k account.

    #217674 Reply

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