Join Early Retirement Today
Thread Tools Search this Thread Display Modes
New Solo Roth 401K vs Existing Roth IRA, vs ??? Advice?
Old 01-31-2016, 08:51 AM   #1
Recycles dryer sheets
Join Date: Aug 2014
Posts: 157
New Solo Roth 401K vs Existing Roth IRA, vs ??? Advice?

I am looking for advice. Background: I am 63, DW is 64. I am currently semi-retired, self-employed working for a small company averaging about 20 -30 hour per month. I expect that this may last as long as I want it to, but it may end tomorrow, you never know. I have no contract. I am currently planning on 3 more years or maybe more. I am paid on average $40K on a 1099-misc and we file a 1040 tax form, no company has been formally setup. DW stopped working last March. Our expenses are ~$50K per year, so we are pulling some $ from our savings to fill the difference until we reach SS FRA (or later). Depleting cash, instead of IRA/401K assets, has been our plan in order to maximize our ACA subsidies and minimize current taxes. Fidelity RIP, i-ORP, other planners, even using a basic 3% WR from pre-tax accounts, tell us we are comfortably set for our next phase in life at a higher spending rate than our accumulation years, even if the PT-job ended tomorrow. Years of LBYM has served us well, not only by building wealth but by creating an expectation of lifestyle that can be continued into our later years without degradation.

I have been working this self-employed job for the last 3 years and not contributed to any retirement savings, thinking that using that income for living expenses was better than tapping into our pre-tax savings. Having cash in the bank was our plan as we are trying to delay SS for as long as possible, at least to FRA. Now, as we are approaching this milestone, I can see we can convert some cash into some retirement savings. SO here is the question, Can I take some money from our cash position and contribute to an existing Roth IRA’s? (yes?) The reason I ask that is, If I setup a new Solo Roth 401K, I would have to wait 5 years before I can withdraw without penalty (I think yes here too?). Can I do either of those without affecting our ACA subsidy? (I think so) Can we also contribute to my DW existing Roth IRA too? (not too sure about this one). Or maybe I should just keep things as they are

As you can tell, we really like having flexibility in our plans. If there is a need in the next year or two, to tap into retirement savings, we don’t want to pay any penalties or affect the ACA subsidy.

CRLLS is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-01-2016, 02:34 PM   #2
Recycles dryer sheets
Join Date: Aug 2014
Posts: 157
I am surprised. No advice? I must have a lot of errors in my thinking. I really would like some help.

CRLLS is offline   Reply With Quote
Old 02-01-2016, 05:12 PM   #3
Recycles dryer sheets
Join Date: Jul 2014
Location: Undisclosed
Posts: 59
There are no penalties on withdrawals of contributions regardless of your age or the age of the Roth.
N02L84ER is offline   Reply With Quote
Old 02-01-2016, 05:40 PM   #4
Recycles dryer sheets
GreenER's Avatar
Join Date: Nov 2014
Location: Pastures
Posts: 124
It is my understanding that if you create a new Roth you would need to hold off five years on any gains but the principal can be withdrawn without penalty at any time.
"One's destination is never a place, but a new way of seeing things" Henry Miller
GreenER is offline   Reply With Quote
Old 02-01-2016, 05:48 PM   #5
Thinks s/he gets paid by the post
Senator's Avatar
Join Date: Feb 2014
Location: Eagan, MN
Posts: 2,112
You should be able to contribute to a Roth for both you and your wife. 6500 x 2 = $13,000.

Maybe you have a 5-year limit, maybe not. Any contributions can be taken tax free, growth must sit 5 years.

Convert $100 from a tIRA now to start the 5-year clock. Do not wait.
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is online now   Reply With Quote
Old 02-03-2016, 07:48 AM   #6
Recycles dryer sheets
Join Date: Aug 2014
Posts: 157
NO2L84ER, Senator and GreenER, Thanks. That confirms most of what I thought. I wasn't sure if I could contribute to an older Roth IRA now that I am self-employed. I thought maybe the two sources of income required 2 different Roth IRA's. I guess that I can just add to the older one. Since that one was opened over 5 yrs ago, there would be no penalty on withdrawals for contributions or gains if situations change and I need to tap into that. And there is no need to do a conversion. Sort of a Win-Win for me in all fronts.

CRLLS is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Do I need an existing Roth IRA to convert from IRA photoguy FIRE and Money 17 02-26-2014 02:03 PM
SEP IRA Vs. Solo 401k Eyerishgold FIRE and Money 14 08-16-2013 11:35 AM
401K, Roth IRA, Roth 401K - Need advice please tsturbo FIRE and Money 15 05-10-2009 02:08 PM
Sweeping funds from Solo 401K to an IRA samclem FIRE and Money 10 11-24-2008 05:16 PM
Solo Roth 401k question summer2007 FIRE and Money 3 07-18-2007 12:12 PM


All times are GMT -6. The time now is 07:23 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.