Comments on: Rollover IRA to Solo 401k http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html like a friend telling you about money ... Thu, 18 Mar 2010 21:18:45 -0500 http://wordpress.org/?v=2.8 hourly 1 By: TFB http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-3035 TFB Wed, 16 Dec 2009 23:22:41 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-3035 Brad - Not being able take money out of solo 401k as easily as you can with a Traditional IRA is a limitation. Except being under your own control, a solo 401k works just like any other 401k. When you have a 401k with an employer, you can't take money out and convert to a Roth IRA until you terminate employment, retire, die, or become disabled. However, you seem to have conflicting objectives. On one hand you don't want to pay taxes on your conversion. On the other hand, you want to pay taxes on your ongoing contributions to your solo 401k and make it Roth. If you pay tax on the conversion and contribute to a Traditional 401k, you will achieve the same thing. Technically it's possible to maintain two 401k plans. You just make your life more complicated that way. If your situation is really complicated, you should talk to a paid advisor. Brad – Not being able take money out of solo 401k as easily as you can with a Traditional IRA is a limitation. Except being under your own control, a solo 401k works just like any other 401k. When you have a 401k with an employer, you can’t take money out and convert to a Roth IRA until you terminate employment, retire, die, or become disabled.

However, you seem to have conflicting objectives. On one hand you don’t want to pay taxes on your conversion. On the other hand, you want to pay taxes on your ongoing contributions to your solo 401k and make it Roth. If you pay tax on the conversion and contribute to a Traditional 401k, you will achieve the same thing.

Technically it’s possible to maintain two 401k plans. You just make your life more complicated that way. If your situation is really complicated, you should talk to a paid advisor.

]]> By: Brad http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-3034 Brad Wed, 16 Dec 2009 21:55:42 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-3034 TFB, Great explanation of using a solo 401-K to shelter pre-tax IRA dollars. Let's say I move ALL my pre-tax IRA dollars to the solo 401-K and do a Roth conversion of my post-tax IRA balances only. What happens if I decide later on that I want to convert some of the pre-tax dollars to a Roth IRA. How do I do that? Any limitations here? The Fidelity guy said once I've transfered the IRA into the 401-K I can't get it out....Roach Motel? Bonus Question....I have a Vanguard solo-401-K because they have the Roth option, but they don't accept transfers as you know. Fidelity accepts transfers but doesn't have the Roth option. You see any problems maintaining solo 401-K plans with both providers? TFB,

Great explanation of using a solo 401-K to shelter pre-tax IRA dollars.

Let’s say I move ALL my pre-tax IRA dollars to the solo 401-K and do a Roth conversion of my post-tax IRA balances only.

What happens if I decide later on that I want to convert some of the pre-tax dollars to a Roth IRA. How do I do that? Any limitations here? The Fidelity guy said once I’ve transfered the IRA into the 401-K I can’t get it out….Roach Motel?

Bonus Question….I have a Vanguard solo-401-K because they have the Roth option, but they don’t accept transfers as you know. Fidelity accepts transfers but doesn’t have the Roth option. You see any problems maintaining solo 401-K plans with both providers?

]]> By: TFB http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2987 TFB Fri, 04 Dec 2009 23:28:59 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2987 nickel - The SEP bit does not make any sense to me, although I never had a SEP. I started with a solo 401k. I think the rep confused between establishing a 401k versus contributing to one. Checking with your accountant is a good idea. You do have to adopt the new 401k with Fidelity. If you want to keep the same Vanguard funds, they will want you to do the two-step I mentioned in the post anyway. So your asset transfer will be initiated from a Fidelity IRA. You can do that online. It only took a few days for me. After the assets arrive at a Fidelity IRA, you write a letter and roll over the IRA to the solo 401k. nickel – The SEP bit does not make any sense to me, although I never had a SEP. I started with a solo 401k. I think the rep confused between establishing a 401k versus contributing to one. Checking with your accountant is a good idea.

You do have to adopt the new 401k with Fidelity. If you want to keep the same Vanguard funds, they will want you to do the two-step I mentioned in the post anyway. So your asset transfer will be initiated from a Fidelity IRA. You can do that online. It only took a few days for me. After the assets arrive at a Fidelity IRA, you write a letter and roll over the IRA to the solo 401k.

]]> By: nickel http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2986 nickel Fri, 04 Dec 2009 21:42:05 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2986 TFB: Just got off the phone with Fidelity and was told that I can't do the SEP to 401(k) rollover this year because I've already made contributions to the SEP during 2009 and I'm not allowed to have both accounts in the same year (?). I said that I had already maxed out what I'll be putting into the SEP, so I won't actually make any 401(k) contributions until next year. He checked with the help desk and they were still of the opinion that I cannot do this. I have a call in to our accountant, but I'm wondering if you can shed some light on this... Did you contribute to your SEP during the year before you executed the rollover? I was also surprised to learn that I have to adopt the new 401(k) with Fidelity and then work with Vanguard to get the money moved. Does that sound right to you? All of my rollovers in the past have involved filling out paperwork with the recipient institution and then letting them go get the money themselves. TFB: Just got off the phone with Fidelity and was told that I can’t do the SEP to 401(k) rollover this year because I’ve already made contributions to the SEP during 2009 and I’m not allowed to have both accounts in the same year (?). I said that I had already maxed out what I’ll be putting into the SEP, so I won’t actually make any 401(k) contributions until next year. He checked with the help desk and they were still of the opinion that I cannot do this. I have a call in to our accountant, but I’m wondering if you can shed some light on this… Did you contribute to your SEP during the year before you executed the rollover?

I was also surprised to learn that I have to adopt the new 401(k) with Fidelity and then work with Vanguard to get the money moved. Does that sound right to you? All of my rollovers in the past have involved filling out paperwork with the recipient institution and then letting them go get the money themselves.

]]> By: TFB http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2977 TFB Wed, 02 Dec 2009 07:10:51 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2977 brewster - If you are paying your tax guy, you should let him do the work and earn it. Otherwise you should pay me :) Yes I have done my research and I didn't have to do anything extra except making sure I leave enough behind. brewster – If you are paying your tax guy, you should let him do the work and earn it. Otherwise you should pay me :) Yes I have done my research and I didn’t have to do anything extra except making sure I leave enough behind.

]]> By: brewster http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2976 brewster Wed, 02 Dec 2009 06:23:22 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2976 I have been thinking about rolling my IRA into my solo 401k (at Fidelity) as you describe. I talked to Fidelity about it and they were not sure it was possible. The 401k can have only pre-tax money. Since my IRA has pre-tax and after tax money, they were not sure it was possible to roll any of the IRA into the 401k. The perspective was that just as with a withdrawal from an IRA, the rollover is done proportionately, eg, if you roll 1/3 of the IRA, then you are rolling 1/3 of the pre-tax and 1/3 of the after tax parts. This is true independent of whether the pre-tax and after tax parts are in separate accounts or co-mingled. I talked to my tax guy today and he was not sure either but is still researching it. My main questions, did you need to take any special actions to account for or separate the pre-tax and after tax parts of your IRA when doing the rollover into the 401k? Have you researched any of the IRS publications to verify that separating the pre and after tax parts of an IRA by rolling into a 401k is allowed? Maybe I just need to keep calling Fidelity until I get some one that is familiar with this process. I have been thinking about rolling my IRA into my solo 401k (at Fidelity) as you describe. I talked to Fidelity about it and they were not sure it was possible. The 401k can have only pre-tax money. Since my IRA has pre-tax and after tax money, they were not sure it was possible to roll any of the IRA into the 401k. The perspective was that just as with a withdrawal from an IRA, the rollover is done proportionately, eg, if you roll 1/3 of the IRA, then you are rolling 1/3 of the pre-tax and 1/3 of the after tax parts. This is true independent of whether the pre-tax and after tax parts are in separate accounts or co-mingled.

I talked to my tax guy today and he was not sure either but is still researching it.

My main questions, did you need to take any special actions to account for or separate the pre-tax and after tax parts of your IRA when doing the rollover into the 401k? Have you researched any of the IRS publications to verify that separating the pre and after tax parts of an IRA by rolling into a 401k is allowed?

Maybe I just need to keep calling Fidelity until I get some one that is familiar with this process.

]]> By: TFB http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2970 TFB Mon, 30 Nov 2009 21:56:31 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2970 nickel - I'm not sure what the absolute deadline is. If you do the rollover in 2009, it's squeaky-clean when you do the conversion in 2010, no matter which date is used to calculate the pro-rata tax for the conversion: 1/1/2010, date of conversion, or 12/31/2010. I did some trial numbers on Form 8606 and it seemed to suggest 12/31/2010 is the absolute deadline for the IRA to 401k rollover. But the form is confusing to me. I'm not confident enough to suggest 12/31/2010 to other people. I would stick to 12/31/2009 to be safe. nickel – I’m not sure what the absolute deadline is. If you do the rollover in 2009, it’s squeaky-clean when you do the conversion in 2010, no matter which date is used to calculate the pro-rata tax for the conversion: 1/1/2010, date of conversion, or 12/31/2010.

I did some trial numbers on Form 8606 and it seemed to suggest 12/31/2010 is the absolute deadline for the IRA to 401k rollover. But the form is confusing to me. I’m not confident enough to suggest 12/31/2010 to other people. I would stick to 12/31/2009 to be safe.

]]> By: nickel http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2968 nickel Mon, 30 Nov 2009 20:17:41 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2968 Hey, any idea when the rollover to the 401(k) has to be done? Does it just have be done before the conversion, or does it have to be done before the start of 2010? In other words, could I do the rollover early next year and then do the Traditional-to-Roth thing? Or are the conversion calculations based on (for example) the numbers at the start of the year? Hey, any idea when the rollover to the 401(k) has to be done? Does it just have be done before the conversion, or does it have to be done before the start of 2010? In other words, could I do the rollover early next year and then do the Traditional-to-Roth thing? Or are the conversion calculations based on (for example) the numbers at the start of the year?

]]> By: Rajamadajama http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2935 Rajamadajama Wed, 18 Nov 2009 20:10:25 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2935 I just opened up a solo 401(K) at Etrade (called an individual 401(K) on their site) with no fees and with a loan option that Fidelity regretfully does not have. Etrade's financials seem to be improving so I felt safe placing my retirement monies with them. There is no fees associated with the account or with the loans but there also isn't the caliber of customer service that I have been used to having accounts with Fidelity. Do any of you have any experience with Etrade regarding solo 401Ks? I just opened up a solo 401(K) at Etrade (called an individual 401(K) on their site) with no fees and with a loan option that Fidelity regretfully does not have. Etrade’s financials seem to be improving so I felt safe placing my retirement monies with them. There is no fees associated with the account or with the loans but there also isn’t the caliber of customer service that I have been used to having accounts with Fidelity. Do any of you have any experience with Etrade regarding solo 401Ks?

]]> By: TFB http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html/comment-page-1#comment-2818 TFB Wed, 21 Oct 2009 14:19:29 +0000 http://thefinancebuff.com/2009/09/rollover-ira-to-solo-401k.html#comment-2818 nickel - Vanguard's solo 401(k) plan does not accept incoming rollovers from IRAs. It only accepts rollovers from another solo 401(k). That eliminated them from the consideration. I can't think of a good reason to get the money back into an IRA right now. You are in control of the solo 401(k). You can invest in anything you want. The 5500-EZ form is pretty straight forward if you have to file one (> $250k in assets). You can terminate the plan if you really want to. nickel – Vanguard’s solo 401(k) plan does not accept incoming rollovers from IRAs. It only accepts rollovers from another solo 401(k). That eliminated them from the consideration. I can’t think of a good reason to get the money back into an IRA right now. You are in control of the solo 401(k). You can invest in anything you want. The 5500-EZ form is pretty straight forward if you have to file one (> $250k in assets). You can terminate the plan if you really want to.

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