401K Roth conversion .... Solo option

[Tony Hightower]

I currently have a 401k with my employer with a mid 100's balance. I also have the ability, self employment, to open a solo401k with the intention of eventually rolling over my employer balance if I retire or forced to leave.

I also have the option of making my 401k a Roth. Roth was not available when account was started. I have not changed it because of the large tax hit I would take, considering my family income and thought I could convert in 4-5 years when wife retires(less income), I would still have 10 or so working years.

Question is, with the change in tax rate should I just go ahead and Convert this in 2018? Not sure If I can do partial conversion and plan over a few years to save some on tax hit.(Fidelity 401k?) . But I do believe I can immediately change my contributions to Roth.

2nd Question, When in a Roth 401k are my employer matched contributions taxed to me?

I know there are lots of other things that may go into it. And if I open a Solo401k this year(18) I will only be able to put in 4-5k.

Just wanting to be prepared for fast movement when needed.

Thanks

T

[Dmitriy Fomichenko]

Tony,

Regarding your Roth conversion question - to get an accurate answer you need to talk to your CPA who understands your tax situation (current and future) and can properly advise you. The bottom line is you need a tax advice, which is beyond public forum.

You can change your contributions to Roth, generally speaking Roth would be beneficial the more time you have for the funds to be invested in tax-free environment, potential return on investment, and few other factors.

Generally, the contributions made by the employer are not taxed to you now, but will be taxable when you take out distribution. But if your plan allows, you may have the ability to do a Roth conversion of your employer contributions. The amount of conversion will be taxable event in the year of conversion, but from that point on can grow tax free for the rest of your life.

Contributions to a Solo 401k are based on your earned self-employment income. You can contribute up to $60,000 for 2017 ($1K more for 2018) and can never be more than what you earn.