On the other end of the spectrum, you've got Bitcoin and Tulips. My initial thoughts were to prioritize tax deferred on the 1099/solo401k (minus the 5% Roth TSP match for BRS) since the military income was state tax-free while the California W-2 wages had half of SE taxes subsidized by my employer. Additionally, a surviving spouse beneficiary my delay commencement of distributions until the later of the end of the year that the employee or IRA owner would have attained age 72, or the surviving spouse’s required beginning date. It's not complicated. In the ER people want to record stuff all the time. Are we sexist? If you will pick a reasonable, straightforward, simple investment plan that you can teach to your fourth grader and you can follow it and you've funded adequately, it’s going to get you to all of your reasonable financial goals. You can use it for a house down payment. If you screwed that up and put it into a traditional IRA and invested in something else and left it there, even for just a few days, and made money, when you convert it, you should still convert everything in that account. I value my privacy more than ever now on Facebook or any social media accounts. So I think your saying I could open up a separate i401k through solo401k and contribute up to my 32k earnings in after tax contributions and then directly convert to my Roth IRA? It's always easier to plug companies that I actually use. How much did she need to be paid in order to contribute $56K to a 401(k) as employee tax-deferred and employer tax-deferred contributions? You're not going to be able to pull it off. Dr. Jim Dahle: 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. Non-designated beneficiaries must withdraw the entire account within 5 years of the employee or IRA owner’s death if distributions have not begun prior to death. So that is step one, right? And so, you want to be able to amend it, but not make it easy to amend it, right? It really depends on your income, what your income is going to be in 10 years, how big the account is and how much has to come out. The backdoor Roth IRA contribution is a strategy and not a product or a type of IRA contribution. If so, that's a good thing. I’ve read/heard of a number of places to open a Roth but wanted to see if anyone had recommendations based on experience. I've been accused by bloggers or whoever out there of not being sophisticated because I don't have some complicated investment scheme. Questions from Medical Students from White Coat Investor Podcast on Podchaser, aired Thursday, 21st December 2017. This is Ben from California. And then of course, this book published in 2021, The White Coat Investor’s Guide for Students it's aimed at students, but honestly the financial literacy section probably makes it worth buying for anybody. I hadn’t thought about the relative loss of 199a deduction with employee solo401k contributions. If you think your income might be anywhere near the income cutoff for a contribution, which is $137,000 if you're single, it's a modified adjusted gross income. But if this is something that really bothers you a lot, maybe it's time to stop doing healthcare in people's homes and to move into an office-based practice. It's about four hours of reading and it takes you through a broad overview of physician financial issues, as well as it kind of talks about our personal story, how Katie and I became millionaires just seven years out of residency, despite only having an average income over those seven years of $180,000 a year. It's kind of a good overview for anybody at any stage of their career. High earners prior to 2010 could not contribute directly to a Roth IRA. So, it certainly works. My cash balance plan contribution went down. I have a question about when to add new asset classes to your investment plan. Therefore, you shouldn’t ask your IRA custodian or trustee for a backdoor Roth … I don't feel safe. Step five is taking care of that pro rata issue. Whitecoat does an incredible job helping people achieve financial success, but you never see a hearse pulling a UHaul! To be clear. Seems like not, but wanted to verify. All right. Thoughts WCI and hive? I'd like to know what my privacy rights are in patients' homes. For instance, if you expect your income level to be lower in a particular year but increase again in later years, you can initiate a Roth conversion to capitalize on the lower income tax year and then let that money grow tax-free in your Roth IRA account. Not sure I have enough info. So, you may notice, those of you who are watching this on YouTube, I got a White Coat Investor t-shirt on. Some people wonder what's the difference between this and the other book? There were a lot of things that were not available, didn't exist in 2004, 2005. 4 Minute Read Roth Solo 401k Benefits . If you forget to do the conversion, you might end up with some huge gain. I stayed the course with it. So much for keeping it simple. A lot of times that's no big deal because you can clean it up the very next year, right? © 2021 - The White Coat Investor – Investing & Personal Finance for Doctors. Dr. Jim Dahle: But if you do it right away especially during the same calendar year, a lot of times they'll go, “Oh, no problem. That's bad. It’s what I call the financial literacy chapters. Dr. Jim Dahle: However, if you lose money in the account, it really makes your tax paperwork complicated because now you've got more basis than you actually had a conversion. All right, the second error. That would be not reasonable. And that's usually a recipe for underperformance, especially in the long run. And then we realized the book was way too long. I don't actually make enough clinically to max out the partnership 401(k) even if I use the employee contribution there, but I can contribute more overall if I use the employee contribution there instead of our individual 401(k). So much so they get themselves worked up over hypothetical changes to the tax code or student loan crisis. You’ll need a plan that allows that. Dr. Jim Dahle: Be sure to check out our backdoor Roth IRA tutorial, if you have not yet. Now, Roth IRAs are awesome because the earnings on that money is never taxed again. iQ401k is a White Coat Investor recommended retirement plan services provider. This is retirement account space that you can't get back. I generally don't put those into my portfolio. I hadn’t thought about the 199a deduction being effectively reduced by making employee contributions to solo401k. It's like the constitution. At my w2 job if my employee contributions are 19k and employers contributions are 11k… would I only be allowed to add 26k in my i401k? So, step one, contribute to the traditional IRA. Left unsaid (unless I missed it) is the point that a reduction in social security taxes may result in a reduction in social security payouts. And so, a lot of times they'll let you do that, but it's really up to them. Plus, they just lowered rates for physicians and dentists still in residency. So, she's got a long life ahead of her, hopefully, and I'm not sure if I should send her to a financial advisor or an accountant or both. It is worthwhile to check your form to ensure you did not do this. If you refinance your student loans through SoFi, you’ll get a $500 cash welcome bonus just for listeners of this podcast. Not every time. Those reviews really do help us to spread the word. A lot of people think they messed up and really didn't. The way you fix it if you screw that up is you recharacterize that contribution, that Roth contribution into a traditional contribution. But unfortunately, people screw it up all the time. And so, we did. Your investment plan, this written investment plan that I hope you all have, is a living, breathing document. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011. If there's not, well, you got to think, is there some other way I can diversify it? That doesn't mean you can't do it. Avoid the preparation issue. They are more like contracts. Step three, move it to a Roth IRA. So we want to pay her as little as possible while still being able to max out that account and justify the salary to the IRS. Let's take a question off the Speak Pipe. Things that pay 7% dividends are not low risk investments. My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. And then you reconvert it. Don't do anything with it inside that traditional IRA. Employ your time in improving yourself by other men's writings, so that you shall gain easily what others have labored hard for. I don't think there is. Fire Your Financial Advisor Online Course, More of your portfolio is in tax-protected accounts and thus grows faster, A larger percentage of your heirs' inheritance can be. So, what should she do as far as advice? Of course, Roth money, whether it's a Roth 401(k) or Roth IRA, there's no taxes due when that comes out of the account. I'm ignoring the savings we do for our kids (Roth IRAs, UGMAs, 529s) and our taxable account contributions (actually the majority of our savings these days) here. The limit is $19K in employee tax-deferred contributions to all 401(k)s. There is no limit on employee after-tax contributions. They've got to have your consent to do it in California. I inherited a little over a hundred thousand dollars from my dad when he died. Whereas the old plan let everyone contribute up to $30K, in the new plan the contribution limits are determined by age. Go through the backdoor. So, can you speak to that as well? Hard to know for sure, but yes, I think the latter. Dr. Jim Dahle: Welcome bonus not available to residents of Ohio and cannot be combined with any other offer, bonus, or discount. You can't recharacterize conversions, but you can recharacterize contributions to the wrong kind of account. The math would demonstrate that, most of the time, you probably shouldn't be buying a home in those circumstances. We are going to give a copy of this book to every first year MD student, DO student and dental student in the United States. It's not complicated. In the end we did pay her the max 401K/Roth IRA contribution salary (now $39K), since we are super savers. There are laws that keep you from getting recorded in places where you should expect privacy without consent, like public bathrooms. All they did is made their paperwork a little more complicated, which is not a big deal if you just follow the directions. Yup, our family is voluntarily contributing to the gender pay disparity. Dr. Jim Dahle: Put it in a traditional IRA. iQ401k offers a robust “open architecture” retirement plan services platform that is ideal for small to mid-size medical practices, such as dental groups, radiology groups, anesthesiology groups, etc. However, if you lose money in the account, it really makes your tax paperwork complicated because now you've got more basis than you actually had a conversion. You remember you're supposed to then convert it to a Roth IRA. The second part of the book is shorter. For example, let's talk about buying versus renting. Vanguard's individual 401(k) has its issues. All conference attendees and first-year medical school champions will be receiving t-shirts in the mail. It's pretty easy to put it in their boxes or pass it out to them at class or whatever. I have read the WCI Post on this topic, but it is from 2014. 1 Subject to phase-out based on IRA owner’s modified adjusted gross income for deductibility to a Traditional IRA or for contributions to a Roth IRA.. 2 If spouse elects to treat the Inherited IRA as his/her own. Reason I point this out is when I was first doing the calculations on this I made the mistake of comparing the marginal savings rate on deferral to the marginal rate on withdrawal and assumed if I saved 37% going in and paid that marginal rate in retirement then I was net neutral, but in fact the effective tax rate on withdrawal is lower. Well, you got two options most of the time. 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