Author Topic: Maxed out IRA, now what?  (Read 1878 times)

texastumbleweed

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Maxed out IRA, now what?
« on: June 29, 2017, 09:02:22 AM »
I've maxed out our Roth IRA for the year.  We are both self employed, but each in our own businesses.  We have no debts or mortgage.  We have our emergency fund in a brokerage account in fidelity.  Should we add extra income to the savings in our brokerage account or can we open a traditional IRA in addition to our Roth, can you have both?  Our income this year will be at least 150k max would be 200k.  I'm super confused about where to put the 100k after tax savings.

Thanks.

MDM

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Re: Maxed out IRA, now what?
« Reply #1 on: June 29, 2017, 11:19:04 AM »
Solo 401(k) plans or similar?

See also Investment Order.

koralcem

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Re: Maxed out IRA, now what?
« Reply #2 on: June 29, 2017, 11:47:39 AM »
Congrats texastumbleweed; that sounds like a good problem to have! :) The investment order thread linked my MDM is an excellent resource for such questions.

To answer a question about IRAs that was also in your paragraph: Yes, you can have both a traditional IRA and a Roth IRA account open at the same time. That said, you can only contribute a total of $5500 ($6500 if you're 50 or older) to all IRAs combined, regardless of type. For instance, since you maxed out your Roth IRA, you're done for this year. Next year, you can do the same. Or all $5500 to a traditional IRA. Or $3000 to a Roth, $2500 to a traditional, or any combination thereof. Note that this all assumes you still qualify to contribute to either type based on income limits.

dandarc

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Re: Maxed out IRA, now what?
« Reply #3 on: June 29, 2017, 11:54:11 AM »
Are these 1-person show type businesses, or do you have employees?

texastumbleweed

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Re: Maxed out IRA, now what?
« Reply #4 on: June 29, 2017, 09:54:17 PM »
No employees, so we each have our own work for ourselves businesses.

Thanks for the note about IRA's, I'll look into the solo 401K's.

texastumbleweed

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Re: Maxed out IRA, now what?
« Reply #5 on: June 29, 2017, 10:03:01 PM »
Quick question about the solo 401k, so if we don't work together, but we each open a 401k solo, can I use his profits to fund my solo?  For example, lets say he make 100k and I make 10k in a year, can I use part of his 100k to fund my solo? 

Paul der Krake

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Re: Maxed out IRA, now what?
« Reply #6 on: June 29, 2017, 10:14:25 PM »
Nope. It needs to come from the business sponsoring the plan.

BUT if you have a huge discrepancy in income, it might be worth it to only have one plan that's for both the owner and the spouse. The IRS, realizing that it's really hard to keep your spouse out of your business, has a very low bar in what's necessary for a spouse to be eligible to contribute to a spousal solo 401(k).

You should really familiarize yourself with all the wrinkles. You may be able to optimize the crap out of this, including the after-tax space of the solo 401(k).

nara

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Re: Maxed out IRA, now what?
« Reply #7 on: June 29, 2017, 10:15:28 PM »
Can you contribute to a Roth IRA with your income being so high?! I believe the max income limit is $196k for a Roth.

If you are self-employed with no employees you should look into a SEP-IRA. However, if your income is too high to contribute to a Roth, you would only be able to contribute to a traditional--and I don't believe you will be able to get the tax deduction that comes with a traditional IRA if you have any employer IRA plan (the SEP) and make over $99k.

Do you have a high deductible insurance plan with an HSA? You would be able to contribute $3500 a year each. An HSA is a triple tax benefit: contributions are tax free, medical expenses are tax free, and assets are tax free-- and if you don't use it, it becomes another IRA.

After all of these options have been maxed out, then the remainder should do into taxable accounts.

dandarc

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Re: Maxed out IRA, now what?
« Reply #8 on: June 30, 2017, 06:19:45 AM »
SoloK is the answer.  You could defer as much as 30-40K each, depending on how the income is split in a traditional individual 401K, and how you're organized.  And that reduces MAGI for IRA purposes - you can make a surprisingly large amount of money as a "no non-spouse employees" business owner and still deduct a tIRA, or at least make regular Roth IRA contributions.

2X soloK - $70-80K
2X IRA - $11K
Family HSA (if you have a high-deductible plan) - $6500

Since you're both self employed, your health insurance premiums should be deductible.

Y'all could be investing around 80-100K per year before you've even got to think about a taxable account.  Key is to keep the lifestyle to a point where you can afford to put all that money away.

Out of curiosity, are you sole-proprietors or S-Corps?