Author Topic: What to do with my 401K. Entrepreneur  (Read 1279 times)

aquam

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What to do with my 401K. Entrepreneur
« on: March 01, 2017, 10:23:52 PM »
Hi,

I am looking for some solid advice on what I should do with my 401K. I have about $90K in my 401K account from my old employer and I am trying to decide between rolling over that account to an IRA, Roth IRA Vanguard account or Betterment. I am currently self-employed and will be for the foreseeable future.

What do you Mustachian's recommend?

Thanks
« Last Edit: March 01, 2017, 10:31:58 PM by aquam »

VladTheImpaler

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Re: What to do with my 401K. Entrepreneur
« Reply #1 on: March 01, 2017, 10:34:38 PM »
If you're a self employed sole proprietor, you could open a SEP IRA.
That way you can keep making tax deferred contributions. New contribution limit for 2017 is $54k.

aquam

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Re: What to do with my 401K. Entrepreneur
« Reply #2 on: March 02, 2017, 02:19:35 AM »
Thank you for the reply.

I actually just watched a video in which Dave Ramsey mentions opening a SEP IRA if you are a business owner.

I currently operate my business as an S-Corp, so I will have to do some research on S-Corps and SEP investments. My initial research shows that I can contribute up to 25% of my amount income.
« Last Edit: March 02, 2017, 02:21:56 AM by aquam »

NoStacheOhio

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Re: What to do with my 401K. Entrepreneur
« Reply #3 on: March 02, 2017, 05:41:07 AM »
Thank you for the reply.

I actually just watched a video in which Dave Ramsey mentions opening a SEP IRA if you are a business owner.

I currently operate my business as an S-Corp, so I will have to do some research on S-Corps and SEP investments. My initial research shows that I can contribute up to 25% of my amount income.

You may also be able to roll your old 401k into the new plan.

Otherwise, just put it in a traditional IRA at your preferred broker (Vanguard/Fidelity/Schwab are the traditional recommendations).

stevef941

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Re: What to do with my 401K. Entrepreneur
« Reply #4 on: March 02, 2017, 07:27:14 AM »
I've been self employed for a long time and just recently transitioned to a full time job. But, I've done a lot of research on this. So, here are my opinions and thoughts;

Definitely role over your costly 401k (there are usually hidden fees) into a free IRA, SEP IRA, Solo 401k or other tax deferred account at a discount broker.   This also allows you to buy cheap index funds or individual stocks (what I do) versus the limited options in a corporate 401K. I would also look for incentives. Right now Schwab is offering up to $500 to open an account and fund it.

If you have highly fluctuating income you can use your low income years to convert some of your IRA holdings into a Roth IRA.  You have to pay tax but you get tax free growth.  And once those transferred funds vest in 5 years you can withdraw the basis with no additional tax or penalties - essentially giving you a tax free emergency fund.  Work with an account as it can get complicated.  But, you can convert a larger dollar amount then you will need and re-characterize a portion of the funds back to the IRA to maximize your tax bracket.

ROBS 401ks are a feature of small business 401Ks that allow for business funding with your solo 401K.   So, you can buy a small business, office for your business, work truck, etc... vs. financing. there are a lot of trade offs such as the loss of tax deferred growth, complicated accounting, double taxation (Can only be a c corp), etc.. But, it is an option vs. traditional financing. There are lots of lawyers who will charge you fees to set this up but if you go to any franchise show they will show you how in the hopes that you buy a franchise.

I hope this helps!

Scandium

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Re: What to do with my 401K. Entrepreneur
« Reply #5 on: March 02, 2017, 08:44:29 AM »
Thank you for the reply.

I actually just watched a video in which Dave Ramsey mentions opening a SEP IRA if you are a business owner.

I currently operate my business as an S-Corp, so I will have to do some research on S-Corps and SEP investments. My initial research shows that I can contribute up to 25% of my amount income.

You may also be able to roll your old 401k into the new plan.

Otherwise, just put it in a traditional IRA at your preferred broker (Vanguard/Fidelity/Schwab are the traditional recommendations).

Only thing to watch out for with this is that you won't be able to do a back-door Roth if you're over the income limit. That's the reason I've kept my 401k with my old employer (though the funds are decent anyway)

lthenderson

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Re: What to do with my 401K. Entrepreneur
« Reply #6 on: March 02, 2017, 08:56:46 AM »
I always roll mine over into a self directed IRA at Vanguard where the choices are unlimited but the obvious choice is a diversified index fund portfolio.

aquam

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Re: What to do with my 401K. Entrepreneur
« Reply #7 on: March 02, 2017, 09:46:19 AM »
Thanks for all of the suggestions. Keep them coming.

Would it be possible for me to split my 401k into a SEP and a Vanguard without being penalized? Would there be any benefits(diversification) to doing this?

I want to add that I have about $20K in a Betterment account, which I can use for emergency cash access.

NoStacheOhio

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Re: What to do with my 401K. Entrepreneur
« Reply #8 on: March 02, 2017, 09:50:54 AM »
Thanks for all of the suggestions. Keep them coming.

Would it be possible for me to split my 401k into a SEP and a Vanguard without being penalized? Would there be any benefits(diversification) to doing this?

I want to add that I have about $20K in a Betterment account, which I can use for emergency cash access.

Vanguard is a brokerage and a mutual fund company, so you'll need to be more specific.

You can open a SEP account with Vanguard.