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Old 11-17-2015, 06:27 PM   #21
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Quote:
Originally Posted by BergLust View Post
Hi Exit 2024, thanks for the post. So, let me make sure I understand. YOu were able to open a Solo 401K because you officially have a business. Is this a LLC or something else? Anyway, you rolled your Traditional IRA into your Solo 401K, then are doing a backdoor Roth from your Solo 401K into your Roth IRA. Is that correct? I don't understand the Schedule C comment. Why do you have to do that every year?

Sounds interesting, just need some help understanding! Thanks!
Side business is not LLC, it is just "Sole Proprietor",
here is definition from IRS.gov

Quote:
A sole proprietor is one individual who owns a company that is not incorporated or registered with the state as a limited liability company (LLC). Sole proprietors may or may not have employees.

In a sole proprietorship:

The business does not exist separately from the owner.
The risks of business apply to the individual's personal assets, including those not used for the business.
The sole proprietor reports business income on his or her individual tax return.
Taxes for that business filed on Schedule C of the tax return.
Technically you do not need to have EIN for such type of business and can use your SSN , BUT you still are eligible to get EIN assigned for the purpose of opening Keogh Plan which is "Solo" or "Self-employed" 401k.

Steps would be the following :

-- request EIN from IRS.gov, now you can do it online, when asked for the reason of such request - choose Keogh plan
-- go to fidelity.com and search for Self-Employed 401k, there is the standard plan document that you need to fill out to open account, requires to have EIN
--as soon as account opened you can roll over your Tradition IRA into it, call Fidelity - they will walk you step by step
--after rollover is completed now you do not have any funds in traditional IRA anymore
-- you can start doing back door Roth: make non-deductible contribution into any new Traditional IRA then convert that money into Roth, repeat every year
-- you will need to file Schedule C with your taxes every year for that business and will need to file form 8606 for backdoor Roth activities

Basically that Solo/SE 401k will be holding place for your traditional IRA money but because it is not an IRA it will not affect you ability to do backdoor Roth
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Old 11-18-2015, 05:10 PM   #22
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Quote:
Originally Posted by Exit 2024 View Post
Side business is not LLC, it is just "Sole Proprietor",
here is definition from IRS.gov



Taxes for that business filed on Schedule C of the tax return.
Technically you do not need to have EIN for such type of business and can use your SSN , BUT you still are eligible to get EIN assigned for the purpose of opening Keogh Plan which is "Solo" or "Self-employed" 401k.

Steps would be the following :

-- request EIN from IRS.gov, now you can do it online, when asked for the reason of such request - choose Keogh plan
-- go to fidelity.com and search for Self-Employed 401k, there is the standard plan document that you need to fill out to open account, requires to have EIN
--as soon as account opened you can roll over your Tradition IRA into it, call Fidelity - they will walk you step by step
--after rollover is completed now you do not have any funds in traditional IRA anymore
-- you can start doing back door Roth: make non-deductible contribution into any new Traditional IRA then convert that money into Roth, repeat every year
-- you will need to file Schedule C with your taxes every year for that business and will need to file form 8606 for backdoor Roth activities

Basically that Solo/SE 401k will be holding place for your traditional IRA money but because it is not an IRA it will not affect you ability to do backdoor Roth

Thanks again! I thought it might be better served to post this in the FIRE and MONEY section because I had some more detailed questions on the back door. Your method sounds interesting. I moved this particular discussion topic here:

Struggles with Back Door Roth IRA
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Old 10-01-2017, 05:02 PM   #23
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Hi All,
It's been a while since I last gave an update here. It's been way too long! I feel like I've made very good progress executing my plan. As always, your comments are welcome. Below are my holdings and value now that can be compared to my original post and my second post from May 2015.

High Yield Savings (1.20% interest): $82,575
Other Various Savings (<0.04% interest): $52,486
Individual Investment Account: $583,628, VTI (61%), VEU (18%), COMPANY STOCK (13%), TSLA (3%), F (2%), CASH ($14,000)
Traditional IRA: $157,068, VTI (51%), VEU (30%), BND (14%), CASH ($7,461)
Roth IRA: $35,226, VTI (31%), VEU (20%), BND (7%), F (34%), CASH ($2,875)
401K: $298,437, VINIX (100%)
TOTAL ASSETS: $1,209,420

The following are some additional comments:
  • I have no debt, I do not own a home. I rent.
  • I own a car.
  • I max out my 401K, and my employer matches my contributions at 7% (4% retirement contribution & 3% employer match).
  • I cannot contribute anything to my Roth now because my compensation is above the allowed contribution limit. The current money showing in my Roth is from contributions many years ago.
  • I still hold F in two accounts. It's a nice dividend and I'm in no rush to sell it, but will eventually. I also bought some Tesla as a "fun money" experiment. It's been a good unrealized gain so far. Let's see...
  • I do have more cash on hand than I want right now, but have recently sold some company stock. I plan to DCA that into VTI and VEU in the coming months.

I'm still trying to find other ways to tax shelter some money and/or route more money to my Roth...but so far, I don't see any way to do it with the situation I currently have. Any other tax sheltering ideas would be very welcome. The other thing I was wondering is to see if anyone things shifting % of VTI and VEU...meaning, put a higher % in VEU in my individual account. For example bump up the VEU % to 25 or 30% with new DCA investments. Europe has lagged behind in recent years...perhaps their due for a larger growth rate in the coming years. I've been reading a little bit about this lately.

Thanks a lot for your input! Look forward to it!
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Old 10-06-2017, 12:06 PM   #24
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I'd think about property if you could find a good deal and it makes sense for you. Duplex, live in one side, rent the other and get write offs. Can I ask why you use etf instead of admiral funds for my own knowledge?
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Old 10-08-2017, 12:21 PM   #25
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I'd think about property if you could find a good deal and it makes sense for you. Duplex, live in one side, rent the other and get write offs.
Thanks for the response. That's a good suggestion and one in which I haven't looked into much. Something for me to consider. If you know some good resources that I can read up on, I'd appreciate it if you could pass them along!

Quote:
Originally Posted by columbus View Post
Can I ask why you use etf instead of admiral funds for my own knowledge?
In the beginning, it was simply because it was what i knew to be one of the more cost effective option (low expense ratio). Now, I continue simply because I use Ameritrade and the ETF's are no commission fee and the VFIAX area $50 commission fee (I believe). I know there are some general advantages to the Admiral funds, especially if you want to get out and move into a different fund without triggering capital gains. Maybe I'm missing something else significant and too focused on the commission fee? Thoughts welcome!

Thanks again!
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Old 10-08-2017, 12:35 PM   #26
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Originally Posted by BergLust View Post
  • I cannot contribute anything to my Roth now because my compensation is above the allowed contribution limit. The current money showing in my Roth is from contributions many years ago.

I'm still trying to find other ways to tax shelter some money and/or route more money to my Roth...but so far, I don't see any way to do it with the situation I currently have. Any other tax sheltering ideas would be very welcome.
What Is a Backdoor Roth IRA? | RothIRA.com

Back door ROTH. Look into it. Good luck and congrats on your progress.
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Old 10-08-2017, 12:40 PM   #27
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What Is a Backdoor Roth IRA? | RothIRA.com



Back door ROTH. Look into it. Good luck and congrats on your progress.


Thanks for the reply. I looked into it about a year ago with my employer and it seems they donít allow it. If you know another way Iím all ears!!!
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Old 01-06-2018, 09:49 AM   #28
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Hi All,
Happy New Year! Well, I'm 37 now...and still feel like I'm 25...so I guess that's good! Here is my 2017 year end update! Like many others, 2017 ended up being a very good year. I feel like I've made very good progress executing my long term plan.

Below are my holdings and value now that can be compared to my original post and my second post from May 2015. At the end of my post I have some comments about plans for 2018 and beyond. As always, your comments are more than welcome and very much appreciated!

High Yield Savings (1.30% interest): $69,105
Other Various Savings (<0.04% interest): $28,541
Individual Investment Account: $671,300
Traditional IRA: $0 - Moved money to 401k to facilitate backdoor Roth IRA
Roth IRA: $43,680
Tax-deferred (401K & HSA Investment): $495,500
TOTAL ASSETS: $1,308,126

Additional Comments for 2017:
  • I have no debt, I do not own a home; I rent. I own my car.
  • I max out my 401K, and my employer matches my contributions at 7% (4% retirement contribution & 3% employer match).
  • I started executing a backdoor Roth IRA in 2017. Moved my Traditional IRA money to my 401k first.
  • I do have more cash on hand than I want right now, but as you can see from post-to-post that is going down. I'm DCA-ing that into my individual account each month.
  • I've taken out the individual possession in the accounts from the table above...was getting too messy. Basically, I have a 3 fund portfolio of low fee and commission-free ETF's in the TD Ameritrade accounts (Individual & Roth). I also have a 3 fund portfolio of low fee mutual funds in my 401K and HSA. I try to keep a 70/20/10 mix of domestic/international/bond.
  • I do hold a little bit of F, TSLA, TDOC - for "fun" in the TD Ameritrade accounts.

Here are some thoughts and "resolutions" for 2018:
  • Investigate expanding passive income into other places (duplex, etc..)
  • Develop ideas/strategy/rules for early entry (aka: startups) investments.
  • Get nephew engaged and learning about investments.

Again, thanks for all of your thoughts and feedback! It's been very helpful! Have a wonderful year!
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Old 01-14-2018, 09:40 AM   #29
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BergLust - I just wanted to double-check that you were aware of the change to the commission free ETF list at TDA... since I noticed you were using VTI etc that USED to be on the list but aren't anymore.
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Old 01-14-2018, 12:25 PM   #30
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BergLust - I just wanted to double-check that you were aware of the change to the commission free ETF list at TDA... since I noticed you were using VTI etc that USED to be on the list but aren't anymore.
Hello exnavynuke. Yep, I am aware. I've changed further purchases of VTI to the somewhat equivalent SPTM and VEU to the somewhat equivalent SPDW. I'm a bit disappointed in TD Ameritrade's decision to discontinue the free Vanguard ETF's.

Thanks!
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