Hi all - hoping the collective can help! I went ahead and FIRE'd myself from my "day job" in December 2014 to focus on my rapidly expanding side hustle business, which is as much a passion as it is an income stream. Currently I'm the only employee, and two years ago I setup a self-employed 401k with my adviser to reinvest some returned 401k contributions from my former employer's plan, as well as push a good chunk of the side-hustle profits out of reach of the tax man. This worked well and (in this case), the adviser's direction was worth some bucks to me since it helped save a bunch of money on taxes. That said, he's been paid via the "management fee" for two years and I want to move into something with better fund choices and low costs.
My first choice naturally was Vanguard. I had rolled over my 401k into an IRA there, and have most of my investments consolidated or moving there. Unfortunately, because I now have an IRA, I can't do my annual back door Roth conversion that my wife and I have done each year, and we will be over the direct contribution limits. I know there's a way to pro-rate the contribution over the total IRA amount and pay tax, blah, blah, blah - that feels like a ton of math and a PITA. More Googling brought up a "reverse rollover", where I move the IRA funds back into a 401k, which would then allow me to do the Roth back door conversion. Imagine my dismay when I learned that Vanguard doesn't accept rollover IRA contributions into their 401k....even from Vanguard IRAs! :(
I'm now looking at Fidelity, and their self-employed 401k plan seems pretty good - no admin fees/percentage of asset fees, access to a ton of mutual funds (including Spartan Advantage), etc. The only fee I can find is a $50 account termination fee if I ever have to close out the plan (hire employees, move/sell the biz, etc) - I can live with that.
If you've made it this far - thank you! Questions are:
- Anyone currently using the Fidelity Self-Employed 401k have anything good/bad/other to say about it?
- Currently my Rollover IRA at Vanguard is in VTSAX, VBTLX, and VTABX. I can find equivalent Spartan funds for the first two (FSITX and FSTVX, respectively) but nothing to match VTABX (international bonds). Any recommendations? I checked on Fidelity's site and it doesn't look like I can hold the Vanguard Admiral share funds at their brokerage.
- Based on when I rolled over my former employer's 401k to Vanguard, I'm showing a short-term capital loss of approximately $5K. Is this something I need to worry about from a tax perspective, or is it a moot point since the IRA funds are being moved right back into a 401k? I will already have a long-term capital loss of about $2,500 this year due to selling and consolidating other investments to Vanguard, but as I'm not receiving any distributions from the Vanguard IRA for the reverse rollover, I'm assuming this won't impact things.
- If I do a "reverse rollover" back to the Fidelity 401k so that I no longer have any non-Roth/Rollover IRAs, I'm assuming I can do the back door Roth conversion in this tax year?
I planned on moving the 401k plan anyway to get away from the adviser fee of 1% (especially since with a reverse rollover that would be a horror show), but it seems like I will also get the benefit of easier Roth contributions back again.
Any "gotchas", issues, or recommendations/advice based on the above?
Thanks in advance....