Roth IRA vs Taxable, worth paying $$ and time to get more into Roth IRA?

[Vilgan]

Hi all,

I am now self employed and debating 401k options. I'm strongly leaning towards Fidelity over Vanguard since Vanguard doesn't offer Admiral funds in their solo 401k. However, one issue is that neither offers the ability to implement the mega backdoor roth in the solo 401k account. As described here: https://thefinancebuff.com/after-tax-contributions-in-solo-401k.html its still possible to do this, but it requires some money and time.

In 2016 we will only be able to put in about 20k per year profit sharing, so along with the 18k personal deferral that's 38k of 53k leaving 15k of tax sheltered space unused. I'll be saving/investing the 15k regardless, but since the mega backdoor trick requires extra time and also money to set up ($350 to set up and $100 per year for my half) I wasn't sure the long term benefit of that 15k in tax sheltered vs taxable was worth it. I also haven't thought through the long term math though.

Is it worth $350 + $100/year to get 15k/year into a Roth IRA instead of a taxable account? How long of a time horizon do I need for the payoff to be worth it?

Thanks!

[Vilgan]

Actually, looking at that exact article I linked along with the spreadsheet inside it here: https://docs.zoho.com/sheet/published.do?rid=b6wwv1d611964d92c49f491b3b7f9cc578207

I'm pretty able to answer my own question. It looks like the answer is "yes, its worth it", with about a 3k difference on a 15 year horizon.

[DaveR]

Yes, worth it, even for a year or two. If future profit isn't sufficient to fund the mega (like, say, early retirement!), you can terminate the 401k and rollover to an IRA.

[Fuzz]

I am probably lazier than you are. But one thing I found out when I investigated the Fidelity v Vanguard for a Solo 401K, is that Fidelity does not offer electronic deposits to a solo 401K. You must mail them a damn check (a customer service rep did tell me that I could make a deposit to a taxable account and then have recategorized with a phone call...but crap. No way am I doing that consistently.). Vanguard makes it very easy to make an electronic contribution.

So I canceled my Fidelity and went to Vanguard even though the fees of .17 are .07 higher than .10 Spartan funds. I figured at least I will actually use the Vanguard fund.