To Move IRA -> 401K-i or Not To Move? ...

[wanaberetiree]

... this is the question!

I have majority of my tax deferred funds in Vanguard IRAs (~650K).

I would like to take advantage of possibility to save into after-tax IRA with immediate convert to roth-IRA.

My understating is that in my situation I will be liable for pro-rate tax from my total IRA accounts amount.

If I had tax deferred funds in 401-K type accounts instead I would not have this limitation.

Now, Vanguard has 401K-i accounts, but they do not allow roll-over to them from IRAs (why, who knows?! ).

An options I have is to open 410K-i accounts at Fidelity and then roll-over all tax deferred funds from IRAs to Fidelity (unlike Vanguard, Fidelity allows incoming roll-overs from IRAs ).

I am looking for someone who has gone this route and and any feedback/suggestions on the subject.

Thx!

 

[wanaberetiree]

No one has moved IRA to i-401k Fidelity?!

Please share your point if you don't believe in this way!

 

[panacea]

I understand the concept your referring to but what is a 401k-i?? Never heard of it. Are you talking about a solo 401k?

 

[wanaberetiree]

its 'individual 401k same as solo as I understand.
have you done this?

 

[growing_older]

Can a 401k of any type accept a rollover that isn't from another 401k? I thought you had to be able to show that the IRA was a rollover from a previous 401k. Or maybe the rules changed. I know many 401k plans won't accept roll into at all.

 

[panacea]

most employer-sponsored 401k accept rollover iras but not all. I plan to do the same thing before the end of this year to get the free roth conversion for 2013. As far as I know solo 401ks are for one-owner, one employee businesses so I think you'd have to fit that qualification. Beyond that I couldn't tell you if there's some special rule that would prevent you from opening a solo 401k and moving rollover ira into it. I think that would be an easy google though... or an irs.gov search maybe.

 

[samclem]

Wannabe,
I'm not quite understanding your question.
Issue 1: Is all your present IRA money pre-tax? If so, then for that money there's no reason not to directly convert it to a Roth IRA if you want. No need to go through a solo 401K.
Issue 2: Do you have self-employed income that would allow you to establish a Solo 401K? If not, then I think this option is closed to you. If you do have such income, is there some reason your contributions to that account would be after-tax?
Issue 3: After you close out your Solo 401K (e.g you've shut down the business, etc), you can roll those funds over to a Roth IRA if you's like. At that point you'd have to pay tax on the funds.

 

[panacea]

If I understand wannabe correctly, he/she makes too much money to fund a roth ira for 2013 but wants to do the backdoor roth... immediate conversion of a Traditional ira to a roth ira. but this only works if you don't have any other pre-tax iras that mess up the tax equation... do I understand the issue?

 

[panacea]

A quick online search leads me to believe that you would have no problem moving a rollover ira into a solo 401k, as long as you are a qualifying business owner and the plan document allows it... because the solo is a qualified retirement plan, just like a traditional 401k.

 

[Alan]

If I understand wannabe correctly, he/she makes too much money to fund a roth ira for 2013 but wants to do the backdoor roth... immediate conversion of a Traditional ira to a roth ira. but this only works if you don't have any other pre-tax iras that mess up the tax equation... do I understand the issue?

That is exactly how I read his situation and I fully understand why he wants to create an i401k and move his existing pre-tax IRA into it.

As Sam says, the first question is whether he is eligible to open a solo 401k.

 

[wanaberetiree]

If I understand wannabe correctly, he/she makes too much money to fund a roth ira for 2013 but wants to do the backdoor roth... immediate conversion of a Traditional ira to a roth ira. but this only works if you don't have any other pre-tax iras that mess up the tax equation... do I understand the issue?

Yes, exactly !

 

[wanaberetiree]

A quick online search leads me to believe that you would have no problem moving a rollover ira into a solo 401k, as long as you are a qualifying business owner and the plan document allows it... because the solo is a qualified retirement plan, just like a traditional 401k.

Not true, fir example Vanguard does not allow this rollover

 

[wanaberetiree]

That is exactly how I read his situation and I fully understand why he wants to create an i401k and move his existing pre-tax IRA into it. As Sam says, the first question is whether he is eligible to open a solo 401k.

Well, I do have income from 1099, so assuming I could, yes?