Roth-like ways to save for retirement

[summer2007]

I'm self employed and I do not make a lot of money.

Since I'm in a low tax bracket paying taxes now and then not having to pay them ever again is ideal for me.


But I'm limited to just $4,000 per year that I can put into a Roth.


Just wondering if anyone knew if there is any other options for someone self employed to save additional money on top of a Roth IRA for retirement. With the same idea as a Roth IRA of pay taxes now and never again?


Thanks
Jim

[teejayevans]

Quote:

Originally Posted by summer2007 I'm self employed and I do not make a lot of money. Since I'm in a low tax bracket paying taxes now and then not having to pay them ever again is ideal for me. But I'm limited to just $4,000 per year that I can put into a Roth. Just wondering if anyone knew if there is any other options for someone self employed to save additional money on top of a Roth IRA for retirement. With the same idea as a Roth IRA of pay taxes now and never again? Thanks Jim

Here is a summery of your options:

Tax-Free Retirement Accounts for the Self-Employed (Retirement: Personal Finance) | SmartMoney.com

[ESRBob]

Why not set your little company up with a Roth 401k? The limits will be a lot higher. You need to have w2 income, though.

[summer2007]

Thanks teejayevans and ESRbob!


I didn't know about the roth 401k until now and that sounds like a great option.

What I have been trying to find out on the roth 401k is if you can put $4,000 into a roth ira and an additional $15,000 into a roth 401k or if it would be $15,000 for both as the limit?

Jim

[Mysto]

Yes, you can put the full amount in the 401k and still contribute to your Roth. Use a Solo 401K. I recomend using Fidelity (thanks Brewer) as they will help you and do it for free.

[Rich_by_the_Bay]

And, just in case... some may try to sell you on a variable annuity as a tax shelter.

Don't.

[JohnEyles]

Quote:

Originally Posted by Mysto Yes, you can put the full amount in the 401k and still contribute to your Roth. Use a Solo 401K.

I wonder if there's such a thing as a Solo Roth 401K ?

For me, being semi-retired, I earn less money (doing consulting
and whatnot) than I spend, meaning that I'm drawing from my
portfolio, but not as much thanks to my self-employment income.

Seems like it'd be pointless for me to put money in a regular 401K,
because I'd simply have to withdraw more from my portfolio to meet
my expenses. (This makes sense, right ?)

BUT, if there were a Solo Roth 401K, then it seems like it WOULD
make sense to put as much of my SE income in that as possible,
because, of the huge tax advantage that money would have, even
though it means I'd have to pull more from my portfolio.

Does this make sense, and if so, is there such a thing as a Solo Roth
401k ??

[LOL!]

JohnEyles, you could put your self-employed income in a tax-deferred account in order to lower your AGI. You could then take more money each year from your rollover IRA and convert it to a Roth IRA with minimal taxes. That way you effectively engineer a soloRothIRA.

[JohnEyles]

Quote:

Originally Posted by LOL! JohnEyles, you could put your self-employed income in a tax-deferred account in order to lower your AGI. You could then take more money each year from your rollover IRA and convert it to a Roth IRA with minimal taxes. That way you effectively engineer a soloRothIRA.

Duh ! Thanks. Makes sense to me. So who else does these Solo 401K
accounts besides Fidelity ?

I guess another reason to tax shelter a heap of money, in 2008, even
if it means spending more from a taxable account, is to use most of
the 10-15% brackets for 0% capital-gain profit-taking.

[Webzter]

I have an LLC. My generous employer (me) contributes 20% of my net to my simple k (a sep may be better for you, ask a tax guy).

My employee (me), then contributes anything to get to that IRS max that he forgot to put in at his 8-5 job.

One year it came down to paying my retirement account 12k or paying the IRS an additional 8k. (in addition to all of the other taxes already paid of course) I'll give you a hint, I didn't give the IRS more.

An enrolled agent or CPA should be able to give you the best advice based on your needs / income / expenses.