Does the "Backdoor Roth" even make sense?

[rantk81]

For astute Mustachians who are at a high enough income level that precludes them from making a normal Roth IRA contribution, we all know that you can do a "Backdoor Roth" by (1) Making a contribution to a "non-deductible IRA" and then immediately (2) Doing a conversion to a Roth IRA.

For the past several years, I have specifically chosen NOT to do this.  I will justify my decision below. Do you agree with my reasoning?  If not, why? Am I being sub-optimal?

First, it can be an administrative hassle to do the the Roth Conversions because of the requirement to convert a specific percentage of "tax deferred" IRA amounts and "non-deductible" IRA amounts.  With only a $5000 contribution per year, the overhead from these calculations and record-keeping (and potential penalties for getting it wrong) seem like it isn't worth the effort.  Especially considering that Mustachians who are piling up 'staches on the order of $xxx,xxx or $x,xxx,xxx.

Second, and most importantly --  If I am already making enough annual income such that the federal tax code is phasing me out (or precluding me) from making a Roth IRA contribution -- then by definition, I am already in a fairly high tax bracket.  Assuming I plan on FIRE'ing in the future (and presumably, having a very controlled approach to "managing" my taxable income), I would expect my federal tax rate to be much lower in the future.  If I'm not getting this tax deferral benefit, then it doesn't seem worthwhile to encumber these assets with the more stringent withdrawal rules of an IRA than a normal individual brokerage account. (Yes, there are ways to get the funds out with conversion ladders, 72t, etc... but these are still restrictions on your own funds.)

Mustachians, what say you?

[PizzaSteve]

I think you don't get it.

1. Backdoor Roth is for when you no longer qualify for a tax deductable IRA contribution. 

2. So if you have already maxed out retirement vehicles, you only have after tax left as an option.

3. After tax roth pays no taxes on the earnings portion of your investment.  Any other investment pays taxes on earnings. If you earn enough to benefit from a Backdoor ROTH, i assure you that you will be paying taxes in retirement at a healthy rate, but even a 15% rate is a healthy bite.  NOTE: We worry about .1% AUM fees, so even 15% off the top at withdraw is huge.

4. To make it easy, one avoids the need to track % pre tax/post tax IRA funds by first rolling all traditional IRA money into a personal or company 401K (can set up personal 401k and roll in the assets at Schwab in about an hour or 2).

5. ROTH has no stringent withdrawl rules, so not sure what you are meaning there.

So your arguement is that getting 30 years of tax free earnings on $10k+ per year, for a couple, might require a little work to account for the funds, which is a minor hassle, so to heck with it?  And then you felt the need to publish this thought to the world?edit: i found your arguement confusing.  No disrespect intended.

Ok.

[rantk81]

I think you don't get it.

1. Backdoor Roth is for when you no longer qualify for a tax deductable IRA contribution. 

I thought the Backdoor Roth was for when you no longer qualified for Roth IRA contributions, which is a much higher income threshold than Traditional IRA contributions.

2. So if yiu have already maxed out retirement vehicles, you only have after tax left as an option.

3. After tax roth pays no taxes on the earnings portion of your investment.  Any other investment pays taxes on earningx.

Perhaps my initial post wasn't clear enough... But I'm assuming my tax rate in FIRE will be 0% or close to it, based on a Mustachian lifestyle and the ability to control realized income. My question was then, why subject my assets to the restrictions of an IRA account in this case?

4. To make it easy, one avoids ths need to track % pre tax/post tax IRA funds by first rolling all traditional IRA money into a personal or company 401K (can set up personal 401k and roll in the assets at Schwab in about an hour or 2).

So your arguement is that getting 30 years of tax free earnings on $10k+ per year, for a couple, might require a little work to account for the funds, which is a minor hassle, so to heck with it?  And then you felt the need to publish this thought to the world?

Was the last snarky line really necessary?  Come on man, if you were somehow offended by my questions, it's easy to just to take a pass on this thread...

Ok.

[Undecided]

There's some record keeping, but I wouldn't call it a hassle. The "restrictions" in a Roth IRA are not particularly restrictive, but if they're not worth the tax-free (including state taxes) or the more favorable treatment for some schools' financial aid programs, sure, pass on it. Even if you expect all your retirement income to be at a 0% rate, though, there's the growth while you're working to think about. I also use mine when I need to make a sale with gains in order to rebalance my portfolio, avoiding the 33% tax I'd otherwise pay on capital gains.

[Laura33]

This is me, so let me explain.

1.  I have already maxed out all tax-advantaged plans available to me.

2.  I have no existing tIRAs out there - I rolled everything into my 401(k).  I am not eligible to do a deductible tIRA because I am covered by a 401(k) plan and above the income levels.

3.  Therefore, my only options are: (a) nondeductible IRA; (b) backdoor Roth; or (c) regular post-tax investments.

(a) is right out - I would be putting post-tax money in and then paying regular income taxes on the whole thing when I take it out.  Since my income tax bracket is higher than my CG bracket, and I believe it will stay that way into retirement, this makes no sense for me.

Which leaves me with the backdoor Roth vs. post-tax investments.

So, backdoor Roth:  I put post-tax dollars in.  It grows tax free.  I withdraw it in 20 years or whatever with no tax.

Regular brokerage:  I put post-tax dollars in.  Every year, I pay a little tax on the capital gains the fund incurred (not many, as it is VSTAX, but some).  I withdraw it in 20 years and pay capital gains on the rest. 

So to me, this is a no-brainer -- for a little bit of hassle (get on computer, set up tIRA, go back, roll over), I never have to pay taxes on the growth of that money ever again.  And withdrawal restrictions don't bother me, because I can take my contributions out after 5 years and have other money in regular accounts anyway.   

Caveats: I am currently in an income bracket that actually pays CG tax, and I expect to be after retirement as well; if you are in the 0% CG bracket, this is probably a wash.  And all of this assumes tax laws don't change these fundamental things -- if they do, I will adjust accordingly.

[rantk81]

This is me, so let me explain.

1.  I have already maxed out all tax-advantaged plans available to me.

2.  I have no existing tIRAs out there - I rolled everything into my 401(k).  I am not eligible to do a deductible tIRA because I am covered by a 401(k) plan and above the income levels.

3.  Therefore, my only options are: (a) nondeductible IRA; (b) backdoor Roth; or (c) regular post-tax investments.

(a) is right out - I would be putting post-tax money in and then paying regular income taxes on the whole thing when I take it out.  Since my income tax bracket is higher than my CG bracket, and I believe it will stay that way into retirement, this makes no sense for me.

Which leaves me with the backdoor Roth vs. post-tax investments.

So, backdoor Roth:  I put post-tax dollars in.  It grows tax free.  I withdraw it in 20 years or whatever with no tax.

Regular brokerage:  I put post-tax dollars in.  Every year, I pay a little tax on the capital gains the fund incurred (not many, as it is VSTAX, but some).  I withdraw it in 20 years and pay capital gains on the rest. 

So to me, this is a no-brainer -- for a little bit of hassle (get on computer, set up tIRA, go back, roll over), I never have to pay taxes on the growth of that money ever again.  And withdrawal restrictions don't bother me, because I can take my contributions out after 5 years and have other money in regular accounts anyway.   

Caveats: I am currently in an income bracket that actually pays CG tax, and I expect to be after retirement as well; if you are in the 0% CG bracket, this is probably a wash.  And all of this assumes tax laws don't change these fundamental things -- if they do, I will adjust accordingly.

My situation is pretty much similar to yours, and thank you for your clear explanation. You've hit the crux of the decision for me, and I think going forward I will do the backdoor roth!

[Cpa Cat]

A backdoor ROTH is not worth it if you got a bunch of deductible IRA contributions sitting in an IRA plan that you're going to have prorrate into your rollover. The ideal backdoor ROTH situation is that you've shoved all of those old IRA contributions into a 401(k) somewhere and you have $0 deductible IRA contributions sitting in IRA's.

Then there is no calculations to do, because 100% of your IRA rollover is your $5500 that you made as a non-deductible IRA contribution in the current year. If you're in a position where you have to prorate, you end up in a situation where you're making taxable rollovers during high-earning years which makes no sense at all.

As to whether it's worth it? Personally, I'm willing to amend a tax return over $50. Torturing and flogging my tax return each year is a hobby for me.

[the_fixer]

My situation:

2 401k's both pretax still invested as such
1 Roth 401k still invested still invested as such
My income does not allow me to take a tax deduction for an IRA
My income does not allow me to contribute to a Roth through normal means
I have 0 currently invested in tIRA
I max out both of our pre-tax 401k's to reduce our taxable income

My new company allows after tax contributions and in service rollovers / withdraws as confirmed by calling fidelity

Pretty much the perfect situation to build a nice tax free nest egg that will allow me to grow that money tax free and manipulate my tax bracket in retirement as needed.

[TheStachery]

This is me, so let me explain.

1.  I have already maxed out all tax-advantaged plans available to me.

2.  I have no existing tIRAs out there - I rolled everything into my 401(k).  I am not eligible to do a deductible tIRA because I am covered by a 401(k) plan and above the income levels.

3.  Therefore, my only options are: (a) nondeductible IRA; (b) backdoor Roth; or (c) regular post-tax investments.

(a) is right out - I would be putting post-tax money in and then paying regular income taxes on the whole thing when I take it out.  Since my income tax bracket is higher than my CG bracket, and I believe it will stay that way into retirement, this makes no sense for me.

Which leaves me with the backdoor Roth vs. post-tax investments.

So, backdoor Roth:  I put post-tax dollars in.  It grows tax free.  I withdraw it in 20 years or whatever with no tax.

Regular brokerage:  I put post-tax dollars in.  Every year, I pay a little tax on the capital gains the fund incurred (not many, as it is VSTAX, but some).  I withdraw it in 20 years and pay capital gains on the rest. 

So to me, this is a no-brainer -- for a little bit of hassle (get on computer, set up tIRA, go back, roll over), I never have to pay taxes on the growth of that money ever again.  And withdrawal restrictions don't bother me, because I can take my contributions out after 5 years and have other money in regular accounts anyway.   

Caveats: I am currently in an income bracket that actually pays CG tax, and I expect to be after retirement as well; if you are in the 0% CG bracket, this is probably a wash.  And all of this assumes tax laws don't change these fundamental things -- if they do, I will adjust accordingly.

Nailed it!

[Samsam]

A backdoor ROTH is not worth it if you got a bunch of deductible IRA contributions sitting in an IRA plan that you're going to have prorrate into your rollover. The ideal backdoor ROTH situation is that you've shoved all of those old IRA contributions into a 401(k) somewhere and you have $0 deductible IRA contributions sitting in IRA's.

Then there is no calculations to do, because 100% of your IRA rollover is your $5500 that you made as a non-deductible IRA contribution in the current year. If you're in a position where you have to prorate, you end up in a situation where you're making taxable rollovers during high-earning years which makes no sense at all.

As to whether it's worth it? Personally, I'm willing to amend a tax return over $50. Torturing and flogging my tax return each year is a hobby for me.

So after giving to all pre-tax spaces (401k, hsa, 2 trad iras) - it is not smart to try and do mega backdoor roth rollover? 

[shawndoggy]

This is me, so let me explain.

(a) is right out - I would be putting post-tax money in and then paying regular income taxes on the whole thing when I take it out.  Since my income tax bracket is higher than my CG bracket, and I believe it will stay that way into retirement, this makes no sense for me.

This isn't exactly true.  Your after nondeductible contributions are basis in your tIRA and you don't pay tax on the contribution when withdrawn.  You can't choose to only withdraw the basis though so it just dilutes the taxable amount of your tIRA withdrawals.

[Holocene]

A ROTH has no withdraw restrictions.  No one who is earning enough to disqualify from a regular ROTH contribution will have a 0% tax rate in retirement.  Social security plus savings alone assure that, and we are talking about couples earning over $184-194k per year.

The above all assume you'll be withdrawing after age 59.5 (for Roth to have no withdrawal restrictions) or after age 62-70 (if you're assuming social security income is affecting the tax rate).  If you withdraw from a Roth account before age 59.5, you have to pay tax and a penalty on any earnings.  The contributions come out tax and penalty free, but not the earnings.  And under current law, you can earn quite a bit of income before your dividends and capitals gains are taxed, so it really is possible for taxable accounts to have a 0% tax on them.

I'm eligible for an after-tax 401k aka Mega Backdoor Roth.  I've had questions similar to the OP as to whether I should be putting everything in there or contributing to a taxable account.  I plan to be FI very early and am looking at 25+ years before I can pull earnings out of a Roth IRA tax and penalty free.  On the other hand, I plan to be in the 15% tax bracket where dividends and capital gains are taxed at 0%, so essentially equivalent to a Roth with no restrictions.  The main issues that sway me more towards the Mega Backdoor Roth are 1. Dividends are taxed at 15% right now when I'm in the accumulation phase, and 2. Tax laws might change to get rid of the 0% dividend/cap gains tax rate in the 15% bracket.

In the end, it's not so cut and dried for those who plan to retire extremely early, thus having a short accumulation phase where the tax drag isn't as significant and a much longer time before penalties go away for withdrawing from tax-advantaged accounts without some work-around (ie. SEPP).

[rantk81]

A ROTH has no withdraw restrictions.  No one who is earning enough to disqualify from a regular ROTH contribution will have a 0% tax rate in retirement.  Social security plus savings alone assure that, and we are talking about couples earning over $184-194k per year.

The above all assume you'll be withdrawing after age 59.5 (for Roth to have no withdrawal restrictions) or after age 62-70 (if you're assuming social security income is affecting the tax rate).  If you withdraw from a Roth account before age 59.5, you have to pay tax and a penalty on any earnings.  The contributions come out tax and penalty free, but not the earnings.  And under current law, you can earn quite a bit of income before your dividends and capitals gains are taxed, so it really is possible for taxable accounts to have a 0% tax on them.

I'm eligible for an after-tax 401k aka Mega Backdoor Roth.  I've had questions similar to the OP as to whether I should be putting everything in there or contributing to a taxable account.  I plan to be FI very early and am looking at 25+ years before I can pull earnings out of a Roth IRA tax and penalty free.  On the other hand, I plan to be in the 15% tax bracket where dividends and capital gains are taxed at 0%, so essentially equivalent to a Roth with no restrictions.  The main issues that sway me more towards the Mega Backdoor Roth are 1. Dividends are taxed at 15% right now when I'm in the accumulation phase, and 2. Tax laws might change to get rid of the 0% dividend/cap gains tax rate in the 15% bracket.

In the end, it's not so cut and dried for those who plan to retire extremely early, thus having a short accumulation phase where the tax drag isn't as significant and a much longer time before penalties go away for withdrawing from tax-advantaged accounts without some work-around (ie. SEPP).

Hey, thanks for your response. You've done a much better job of articulating my thoughts/feelings on this than I was able to in my prior posts.

[seattlecyclone]

My wife and I max out our regular and mega backdoor Roths. I consider ourselves borderline FI right now at age 32. I am mostly unconcerned about liquidity during retirement. Anything in traditional retirement accounts can be withdrawn penalty-free with five years' advance planning (Roth conversion pipeline). Roth principal can be withdrawn for free at any time. Taxable accounts can be liquidated at any time with favorable capital gains tax treatment. We've saved up enough medical bills to be able to withdraw a good chunk of our HSA balance at any time as well.

In the end it's really only the Roth earnings that you want to avoid dipping into before you're at "normal" retirement age. Given all those other sources of funds I have a hard time constructing a reasonable scenario where both of the following statements are true:
1) At some point prior to age 59½, you run out of all your money except for Roth earnings, and
2) Your remaining stash at that point would be large enough to see you through the rest of your retirement but for the punitive tax on early withdrawal of Roth earnings.

Try it yourself! I think you'll find that it's pretty hard to come up with such a scenario. Either you saved too little and the fact you're looking to dip into your Roth earnings is just a symptom of the fact that you're going to run out of money before you die anyway, or you saved enough and you won't have to touch the Roth earnings until it's time to spend your "old man money."

[PizzaSteve]

Glad we teased out a better explanation.  I do know that the ROTH has some limits, but there are many paths around that, and after only a few years any penalty is usually funded by tax benefits.  As i said, one needs to run the numbers. 

The payback is usually so fast, for anyone who would qualify, that it is almost always a no brainer.  Fully understand that a few exceptions exist, but usually those are hidden (i want to spend it) excuses any Mustacian earning close to $200k shouldnt need.  Most people living a mustacian lifestyle will quickly fill all tax free buckets and easily fund the backdoor.  Usually with a lot of tax free investment money leftover.  If money is tight, sure, but if you have funds for taxible stock investing, a Roth is almost always superior  (as stock investing should always be at least a multi year time horizon).

A regular backdoor is only 5500 to 6500 per person, which shouldn't be much for a 6 figure earning mustachian's savings rate.  Perhaps i over reacted to the seeming tone that the effort to move any tIRA to a personal 401k and then to do an 8086 form for your year end tax return was too much hassle to gain thousands in tax free 'forever' investment space (plus ability to leave it to heirs).

Glad the collective group has been helpful.

[Secretly Saving]

One other extended benefit of utilizing a Roth IRA that hasn't been mentioned is the ability to offer future generations a huge "leg up" financially -- even so far as skipping over one generation and offering huge opportunities for your grandchildren via the Stretch IRA concept. 

[bryan995]

One other extended benefit of utilizing a Roth IRA that hasn't been mentioned is the ability to offer future generations a huge "leg up" financially -- even so far as skipping over one generation and offering huge opportunities for your grandchildren via the Stretch IRA concept.

Pretty neat - had not read about this concept yet. 70+ years of tax free gains? Yes please.
https://www.putnam.com/literature/pdf/IR705.pdf

[Secretly Saving]

One other extended benefit of utilizing a Roth IRA that hasn't been mentioned is the ability to offer future generations a huge "leg up" financially -- even so far as skipping over one generation and offering huge opportunities for your grandchildren via the Stretch IRA concept.

Pretty neat - had not read about this concept yet. 70+ years of tax free gains? Yes please.
https://www.putnam.com/literature/pdf/IR705.pdf

Yep, and actually Bryan995, the example you linked is just a traditional situation where the child inherits the money.  If a grandchild were named the beneficiary, that money would grow even longer! 

[jmp10021]

4. To make it easy, one avoids the need to track % pre tax/post tax IRA funds by first rolling all traditional IRA money into a personal or company 401K (can set up personal 401k and roll in the assets at Schwab in about an hour or 2).

PizzaSteve, I wanted to ask a clarifying question about this. I'm about to transfer a Rollover IRA into my employer's 401k to facilitate a clean backdoor Roth IRA conversion. I'm not self employed. Based on my research, it appears the Solo 401k is only available to self employed people, right? Any way around that?

I ask because my employer's 401k has an annual 0.29% administrative fee rather than a fixed fee (e.g., $50) like some plans have. My rollver assets are over $500K, so I'm going to get robbed over $1,450 annually in administrative fees. Not cool.

[Ursus Major]

I wanted to ask a clarifying question about this. I'm about to transfer a Rollover IRA into my employer's 401k to facilitate a clean backdoor Roth IRA conversion. I'm not self employed. Based on my research, it appears the Solo 401k is only available to self employed people, right? Any way around that?

I ask because my employer's 401k has an annual 0.29% administrative fee rather than a fixed fee (e.g., $50) like some plans have. My rollver assets are over $500K, so I'm going to get robbed over $1,450 annually in administrative fees. Not cool.

As far as I know you need self-employment income to contribute to a Solo 401k, but I haven't read anything that says that you can't open one and roll money over from an IRA (plan rules permitting of course) in any case. I'd also be interested in getting some confirmation, if this is correct.

[Proud Foot]

I wanted to ask a clarifying question about this. I'm about to transfer a Rollover IRA into my employer's 401k to facilitate a clean backdoor Roth IRA conversion. I'm not self employed. Based on my research, it appears the Solo 401k is only available to self employed people, right? Any way around that?

I ask because my employer's 401k has an annual 0.29% administrative fee rather than a fixed fee (e.g., $50) like some plans have. My rollver assets are over $500K, so I'm going to get robbed over $1,450 annually in administrative fees. Not cool.

As far as I know you need self-employment income to contribute to a Solo 401k, but I haven't read anything that says that you can't open one and roll money over from an IRA (plan rules permitting of course) in any case. I'd also be interested in getting some confirmation, if this is correct.

Obviously talk to a professional about this but what I could find said you need self-employment income and no employees to be able to open one.  I couldn't find anything about keeping one open if you no longer have self-employment income. 

[Gumption]

I have a solo 401k with Vanguard (Scorp).
I max out the employee 18k and i get 25% employer match.
After a few calls to them, they have told me they do not allow after tax contributions.
Do have have any other options to fund a backdoor roth?
right now, all the extra money is going into brokerage.

[CptCool]

I have a solo 401k with Vanguard (Scorp).
I max out the employee 18k and i get 25% employer match.
After a few calls to them, they have told me they do not allow after tax contributions.
Do have have any other options to fund a backdoor roth?
right now, all the extra money is going into brokerage.

There seems to be a lot of confusion with the backdoor Roth and the mega backdoor Roth.

Backdoor Roth = contribute to a traditional IRA on an after-tax basis, then convert to a Roth IRA. The ONLY reason you should do this is when your MAGI is too high to qualify for a regular Roth IRA contribution

Mega Backdoor Roth = contribute to a 401k on an after tax basis, then convert to a Roth IRA. This should only be done after you hit the 401k personal contribution limitation. You need to have in-service withdrawals available with your 401k plan. This allows you to max out the full 401k limit which is much higher than the personal contribution limit.

[Aggie1999]

I have a solo 401k with Vanguard (Scorp).
I max out the employee 18k and i get 25% employer match.
After a few calls to them, they have told me they do not allow after tax contributions.
Do have have any other options to fund a backdoor roth?
right now, all the extra money is going into brokerage.

There seems to be a lot of confusion with the backdoor Roth and the mega backdoor Roth.

Backdoor Roth = contribute to a traditional IRA on an after-tax basis, then convert to a Roth IRA. The ONLY reason you should do this is when your MAGI is too high to qualify for a regular Roth IRA contribution

Mega Backdoor Roth = contribute to a 401k on an after tax basis, then convert to a Roth IRA. This should only be done after you hit the 401k personal contribution limitation. You need to have in-service withdrawals available with your 401k plan. This allows you to max out the full 401k limit which is much higher than the personal contribution limit.

On the Mega Backdoor Roth there is still value in doing it even if you don't have in-service withdrawals available, especially for early retirees. Example, work 10 years, contributing after tax dollars to the 401k. At retirement roll over the 401k into IRAs. The after tax contributions in the 401k roll over into a Roth IRA while the growth on the after tax contributions roll over to a tIRA. Then start the Roth conversion ladder with the tIRA. In the end you pay no taxes on the growth, assuming you can keep the tIRA to rIRA conversion amounts low enough each year. This ends up being better than if one invested the after-tax dollars in a traditional taxable account.

The above would even work for those with a traditional retirement age and facing minimum distributions in a tIRA. Of course with other income, such as SS, and with less dependents the tax space you have for the tIRA distributions to be tax free would be far less so the tax savings with the strategy is not near as good as early retirees.

[afuera]

I have maxed out all my tax-advantaged accounts for 2017 and was just putting any excess into a regular old taxable Vanguard account because Mega-Backdoor Roths seemed scary and confusing.  This thread prompted me to call Fidelity and see if my plan allows for in-service withdrawals/conversions and they do!  Now I just have to figure out if we have enough extra cash contribute all the way up to the 53K limit and if not, how much of our spending we need to cutback so that we do :)
Thanks OP for starting this thread and for all of you wonderful people who posted clear and concise answers.  Y'all just saved me a buttload of money on taxes!

[Nothlit]

I wanted to ask a clarifying question about this. I'm about to transfer a Rollover IRA into my employer's 401k to facilitate a clean backdoor Roth IRA conversion. I'm not self employed. Based on my research, it appears the Solo 401k is only available to self employed people, right? Any way around that?

I ask because my employer's 401k has an annual 0.29% administrative fee rather than a fixed fee (e.g., $50) like some plans have. My rollver assets are over $500K, so I'm going to get robbed over $1,450 annually in administrative fees. Not cool.

As far as I know you need self-employment income to contribute to a Solo 401k, but I haven't read anything that says that you can't open one and roll money over from an IRA (plan rules permitting of course) in any case. I'd also be interested in getting some confirmation, if this is correct.

I, too, would love to know the answer to this question.

[protostache]

I wanted to ask a clarifying question about this. I'm about to transfer a Rollover IRA into my employer's 401k to facilitate a clean backdoor Roth IRA conversion. I'm not self employed. Based on my research, it appears the Solo 401k is only available to self employed people, right? Any way around that?

I ask because my employer's 401k has an annual 0.29% administrative fee rather than a fixed fee (e.g., $50) like some plans have. My rollver assets are over $500K, so I'm going to get robbed over $1,450 annually in administrative fees. Not cool.

As far as I know you need self-employment income to contribute to a Solo 401k, but I haven't read anything that says that you can't open one and roll money over from an IRA (plan rules permitting of course) in any case. I'd also be interested in getting some confirmation, if this is correct.

I, too, would love to know the answer to this question.

There's no reporting when you open a solo 401k. Anybody can open one at any time. I don't think there's any restrictions on opening one and rolling your IRAs into it under your name or a simple DBA. If you ever want to contribute more to it you'd have to have Schedule C self employment income, but that's not hard to get.e