Author Topic: Fidelity Solo 401K and FIRE  (Read 1777 times)

Djeayzonne

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Fidelity Solo 401K and FIRE
« on: September 21, 2016, 04:34:29 PM »
Hey guys,

I just got off the phone with Fidelity. I was hoping to open a solo 401K,
but the person on the phone, who is a retirement specialist as opposed to just a normal rep.,
said that I would not be able to do the Roth ladder conversion and access the money before 59.5.

He suggested I do a SEP IRA instead if my goal is to be retired/semi-retired well before 59.5.

Does this sound right to you guys?

Any suggestions or recommendations?

Djeayzonne

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Re: Fidelity Solo 401K and FIRE
« Reply #1 on: September 21, 2016, 07:49:51 PM »
No, the 401K itself.

bacchi

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Re: Fidelity Solo 401K and FIRE
« Reply #2 on: September 21, 2016, 08:32:01 PM »
I don't think that Fido rep understood what you were asking.

A solo 401k doesn't have anything to do with a Roth conversion ladder. It's necessary to convert a 401k (any 401k) into a traditional IRA but that's it. Once it's in the traditional IRA, the original money source, whether a 401k or another tIRA, doesn't matter (if it's all pretax).

What Fido needs to allow is a 401k->tIRA rollover. They will allow that.* Then they need to allow a tIRA->Roth conversion. That's what you need to ask them.**

Quote from: Fidelity
You can roll your Self-Employed 401(k) assets into another 401(k) (assuming the employer’s plan allows rollovers) or an IRA account.

*https://www.fidelity.com/learning-center/personal-finance/retirement/self-employed-401k and https://www.fidelity.com/retirement-ira/rollover-checklist
**And please report back on what they say. I'm going to do this this next year.
« Last Edit: September 21, 2016, 08:34:09 PM by bacchi »

Djeayzonne

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Re: Fidelity Solo 401K and FIRE
« Reply #3 on: September 21, 2016, 09:10:48 PM »
Cool, thanks for that.

I will call again tomorrow and report back.

Djeayzonne

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Re: Fidelity Solo 401K and FIRE
« Reply #4 on: September 22, 2016, 05:11:17 PM »
Bacchi,

So, yeah, the guy I talked to today seemed to have a much better understanding of what I was trying to do.

Yes, you can convert the 401k to a traditional IRA and then ladder it out.

However, you have to terminate the 401k in order to convert it to the IRA.

I don't know if that really matters or not, but he did emphasize that there has to be a trigger event in order to do anything with it: reaching 59.5, business goes under, death, or terminating the 401k.

The Mobile Mustachian

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Re: Fidelity Solo 401K and FIRE
« Reply #5 on: September 22, 2016, 06:51:14 PM »
If you plan on continuing to work in some capacity after FI, perhaps one approach would be to terminate the Solo 401k when you reach FI, transfer the assets to an IRA, wait until the next tax year, and then open the Solo 401k again in order to resume saving.

bacchi

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Re: Fidelity Solo 401K and FIRE
« Reply #6 on: September 22, 2016, 07:48:17 PM »
Thanks for the update.

I'll probably close down my LLC early next year then. I can always create a new one if I decide to do more work.