It's a great opportunity to really get the WCI message out there and get this information to students when it can be most useful to them. Because the second one isn’t really an IRA, it’s a 401(k) with a weird name. Now, because they never got the deduction, there's no tax cost to the conversion. When you file the tax forms, that's important because you each have your own individual form 8606 on your taxes that reports this. How would you typically advise someone who likely falls into the “super saver” category (~40% gross income saved) but won’t get the 199a deduction due to income. Well, you do the conversion late and you pay the taxes. Once they've sent out W2's and 1099s for the year and reported their stuff to the IRS for the plan, they won't let you make changes. Bogleheads® is the title adopted by many of the investing enthusiasts who participate in this site. If you have a 401(k) or 403(b) at work, they almost surely accept IRA rollovers. If you want to do $56K as a non-deductible employee contribution (assuming you’re an employee of your S Corp like me) you could do it with just $56K of icnome. So how do you get it to zero? It can be amended. It's not complicated. Not all products available in all states. But it's a little more complicated situation. Dr. Jim Dahle: You can't recharacterize conversions, but you can recharacterize contributions to the wrong kind of account. The lower, the better, right? So that's the point of your solo 401(k). We have all the money we will ever need. Don't contribute directly to the Roth IRA. Employ your time in improving yourself by other men's writings, so that you shall gain easily what others have labored hard for. You couldn't do any of that stuff before 2010. It's technically not earned income. My understanding is that we are limited to 19000 employee contributions across all the 401ks. We expect to give away 30,000 of these. People don't invest the difference. And this is one of the rules that has to do with Roth conversions. And if I increase my 1099 income more to 56k I can still do my w-2 work Roth 401k for 19k plus whatever my employer contributes, and still contribute max of 56k into after tax solo401k? [Disclosure: If you register for WCI CON 21 using this link, ... You can spot them by their excited puppy dog eyes and endless questions about the backdoor Roth IRA. We talk about how to pay for it. Now obviously if somebody is in extremis, we can't abandon them just because we are being recorded. Welcome WCI Readers! Say someone had $25k/ yr vs the full 55k. So, on one end of the spectrum, you've got equities, bonds and broadly diversified index funds. It's by far the best-looking book I've ever published. This is the flip-side of the 80% deduction phenomenon I previously blogged about here. They had to go to either Schwab or Fidelity. Welcome bonus not available to residents of Ohio and cannot be combined with any other offer, bonus, or discount. It sounds like making that conversion is probably going to be a good move for you. A backdoor Roth IRA is who you make too much money and still want to contribute to a Roth IRA, through the back doo. Nicole: You can do one for your spouse as well even if your spouse doesn't have any income, as long as you have enough income to cover your spouse's contribution. Would it make more sense to put remainder in Cali W-2 401k plan to maximize the 199a deduction and then employer contributions in solo401k? Dr. Jim Dahle: Rolled that ~2300 over into her pretax 401k in early 2020, subsequently completed a backdoor Roth IRA contribution for her for 2020. If you send us a picture of you and your classmates with the book, we'll send you a mug, a WCI mug. Just convert it. But the idea of more Roth money certainly is appealing, just hard to predict 5 years from now both good and bad. This is your chance to be the hero to your classmates, but you only have until June 1st to volunteer. Pages and pages and pages and pages and pages. Again, it's personal and financial. Many of us need to contribute to the Roth IRA through the backdoor, which can be confusing. So, I hope that's helpful. Although it’s hard for me to think of instances when a spouse would want to do that instead of just rolling it into their own IRA. The final part of using a backdoor Roth IRA is to ensure your taxes are properly filed at the end of the year. Now this varies by state. The only employees of WCI, LLC are its two owners. Although you don’t have all the specifics, how would you typically advise someone who likely falls into the “super saver” category but won’t get the 199a deduction due to income. I was looking to transfer my 401k somewhere else to do aftertax contributions. So, the way you avoid getting prorated on your conversion is by having no money in any of those accounts on December 31st of the year you do the conversion. For IRA distributions, see Publication 590-B, Distribution from Individual Retirement Arrangements (IRAs), or this chart of required minimum distributions to help calculate the required minimum distributions. You get into a pandemic. Why does the overall cap not apply in this situation? We talk about avoiding financial catastrophes. They're actually quite sophisticated, standing on the shoulders of decades of peer reviewed market research, a few Nobel prizes, and cold hard undeniable evidence of success”. Total income is below 199a phaseout limits for service based business. Now, if you made the mistake of just leaving it all in cash, well, that's unfortunate. 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