Retirement account alternatives

[nedwin]

I recently started a new job where the employer does not offer a 401k or other retirement plan.  It's a small employer (only 7 employees, including the founder),  but it pays well and it took me nearly 6 months to find this job so I'm not inclined to look for another for this reason alone.  The company's payroll service has a built in 401k option.  I looked into this and determined the boss only needs to click a few buttons and the 401k would be available.  I will push that he do this.  The only debt we have is a mortgage at 3.25% and an auto loan at 3.5%.  I don't want to accelerate payment on the mortgage, but will accelerate payment on the auto loan after I set up a plan for retirement savings.  I've gone through the investment order and come up with some options, what do you all think?  These are in no particular order.

Option 1:  My wife's employer offers a 403(b) and 457(b).  we also receive health insurance through her job, which has an HSA.  We are already maxing her 403b, but between maxing the 403b, taxes, and insurance/HSA her take home is about $500/2 weeks.  We could increase the HSA and/or 457b to so she receives no take home.  This option would maximize tax savings now.

2:  backdoor roth.  The problem with this is I have about $50k in my traditional IRA, so will have to move that out in order to minimize tax consequences from the traditional to roth conversions.  We are likely in the 22% tax bracket, so converting it all to the Roth would cost about $11k in taxes.  I have a 401k from a previous employer, in theory I could move the traditional IRA balance into this account to avoid taxes on conversions.  I need to verify that this 401k plan would allow a rollover from a traditional IRA.

3:  taxable account.  maybe fill it with muni bonds to avoid capital gains taxes?  Or taxable securities, as there would not be large tax liabilities for quite some time.

Any suggestions? 

[Chrissy]

Option 1.

[405programmer]

Near term, probably Option 1.

Also, if your income is in "need to consider backdoor-roth" levels I would still do some searching through the email / 401k provider website to see if it possible to still put the funds from your IRA into that 401k. That could be useful longer term. Then if you talk the boss into creating the 401k plan at the current job you can consider the fund options and maybe even roll it all into 1 account. I wouldn't ease up pressure on the boss on the 401k especially if it's something that can just be set up already with your current payroll system.

Option 3 is always a choice and I would try to optimize your taxes prior to just dumping more money into a taxable account. Although taxable accounts certainly aren't "bad", just not optimal.

BTW, your SO might be more iron-willed than I am but I know if I was taking $0 home on each paycheck I would start to feel a little demoralized after a long time of that. It's fun to see money hit the account and know "I did that" but maybe that's just the selfish lizard brain in me talking. That's the only reason I mention "near term" in regards to option 1.

[maizefolk]

If your old employer offered a 401k plan and you used it, it MAY be possible to roll your current IRA balance into your 401k account. Only about 2/3rds of 401k plans offer this as an option to begin with, and even among those it may only be an option while you are working there. But unlike IRAs funds in a 401k plan don't create problems if you want to do backdoor roth conversions. But that'd be a supplement to option #1, not an alternative to it.

[terran]

Does your wife work for a government employer? Governmental 457(b) plans are great for early retirees because they're just like a 401(k)/403(b) except they don't have an early withdrawal penalty to get around. I'd normally suggest contributing to an HSA by payroll deduction, but if you wife doesn't make enough to max out all 3 accounts from payroll it might be better to max out the 403(b) and 457(b) to the extent possible and then contribute to an HSA with outside money.

Find out if your old 401(k) will accept a rollover from your IRA. I wouldn't want to convert $50k in teh 22% bracket. Your wife can also contribute to a backdoor Roth based on your income even if all her income is being reduced too much by contributing to tax deferred accounts.