Author Topic: Please help me figure out how to contribute to my retirement this year  (Read 2072 times)

snuggler

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Hey! I need some of your collective wisdom.

I've had a strange year financially. The jist:

- I made about $20,000-25,000 in W-2 wages (I worked for part of the year, but not a lot of it (family issues))
- I have about $2780 in profits from a side gig as an independent contractor  (through an Uber-like shared economy company, but not Uber). I don't have many business expenses- maybe $50 total.
- My SO and I got married this year.
- We live in DC. I am 32, SO is 34.
- My SO  SO works as a sole proprietor, earned about $65,000, and will contribute the max he can to a solo 401(k) before year-end. I believe this was around $25,000-28,000 last year, when he earned a little less. He also has few business expenses- we can deduct his home office, and a few supplies, but that's about it.
- We don't have many other available deductions- maybe student loan interest deduction (but that's probably low, since we have a low five-figure loan we are paying off slowly due to its low interest rate), maybe renter's credit, if there is one in DC.
- I will be returning to work in early 2016, and will make enough to boost our stash substantially
- We have enough saved to be fine for a long time, even if life throws us another wrench

We are wondering what else we can do to maximize our savings through retirement accounts, tax strategy, etc.

Some specific things we are thinking about:

1. Should we file jointly or separately?
2. Can I put everything from my side gig into a retirement vehicle? Maybe a Roth IRA, or a solo 401(k)? I would still have to deduct self-employment taxes (15.3%) before contributing, correct?
3. We could also each do a Roth IRA up to $5500, correct? Would it then make sense for me to to a solo 401(k) with the side gig income, and then $5500 in a Roth IRA with my W-2 income?
4. Do I have to pay estimated taxes? Most of this income was in the last quarter of 2015, but some was in late Q3. SO already pays his estimated taxes quarterly.
5. Should we also max out our HSAs? We both have them available through our current marketplace individual healthcare plans, so I'm not sure if we could each put in $3350, or if we could only put in $6650 total since we are now married.
6. You can't purchase a family healthcare plan on the exchange if it is just you and a spouse, correct? I haven't been able to find anything for non-dependents on the exchange.

What do you think?

MDM

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Re: Please help me figure out how to contribute to my retirement this year
« Reply #1 on: December 12, 2015, 03:01:48 PM »
1. Should we file jointly or separately?
2. Can I put everything from my side gig into a retirement vehicle? Maybe a Roth IRA, or a solo 401(k)? I would still have to deduct self-employment taxes (15.3%) before contributing, correct?
3. We could also each do a Roth IRA up to $5500, correct? Would it then make sense for me to to a solo 401(k) with the side gig income, and then $5500 in a Roth IRA with my W-2 income?
4. Do I have to pay estimated taxes? Most of this income was in the last quarter of 2015, but some was in late Q3. SO already pays his estimated taxes quarterly.
Congratulations and best wishes on the marriage!

See http://forum.mrmoneymustache.com/ask-a-mustachian/financial-advice-goals-ways-to-cut-back-and-investments/msg890766/#msg890766 for thoughts on a very similar situation.

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5. Should we also max out our HSAs? We both have them available through our current marketplace individual healthcare plans, so I'm not sure if we could each put in $3350, or if we could only put in $6650 total since we are now married.
$6650.  See https://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204045.

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6. You can't purchase a family healthcare plan on the exchange if it is just you and a spouse, correct? I haven't been able to find anything for non-dependents on the exchange.
Don't know, but would be surprised if this is true.  For HSA purposes, "family" = you + at least one other (so you plus spouse counts).

lhamo

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Re: Please help me figure out how to contribute to my retirement this year
« Reply #2 on: December 12, 2015, 03:14:35 PM »
Since most of your contracting income was in Q4, you should pay your estimated taxes by January 15th.  Overpay if necessary and then claim back when you file your return to avoid interest/penalties.

Since you will have a steady job/income for 2016, I would focus on maximizing contributions to retirement accounts/HSA now while you can with the 2015 income.  I guess that would mean fully funding Roths for both of you, HSAs up to married couple max, and setting up a solo 401k for yourself -- though given how little you earned in non-W2 income it might be easiest to forego the solo 401k for yourself. 

I purchased health insurance on the WA state exchange for myself and my son.  Estimates for coverage that would have included my spouse and daughter were higher premium payments.  But most plans seem to max out deductibles and out-of-pocket expenses at 2x the cost for individual coverage.  May vary state to state.  But you should be able to get a plan for yourself and spouse. 

snuggler

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Re: Please help me figure out how to contribute to my retirement this year
« Reply #3 on: December 13, 2015, 06:22:26 PM »
Thanks for the second opinions, everyone! It is nice to hear that we were thinking about the right things.

And thanks for the exchange advice. I haven't been able to find anything, but will call the exchange tomorrow and see why I'm not seeing anything for families online.