multiple self directed retirement accounts

[Account Closed]

ok gang, i'm trying to wrap my head around this stuff..can i do a combination of a self directed (or solo--not sure the proper term), AND a roth (either IRA or 401k)?? I would really like the solo 401k, since from my undertanding you can contribute up to 50k a year..so that automatically reduces your adjusted gross income by that 50k...nice! i'm gonna need that...however, i also wouldn't mind throwing a little into a roth so it's all tax free when i pull it out.(however i'll be honest, 59 feels a long ways away)... :) for roth IRA, i believe i can contribute 5k a year..correct? for roth 401k, i can contribute 17k/year..is that right? so can i have a roth and a solo 401k?? thanks guys!

[Steven Hamilton II]

Bryan A.,

To answer your questions

1. can i do a combination of a self directed (or solo--not sure the proper term), AND a roth (either IRA or 401k)??

Yes you can; however, there are AGI limitations on the Roth IRA. You can have both a 401k and a Roth 401k.
[/b]Can You Contribute to a Roth IRA?

"Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than:

$179,000 for married filing jointly or qualifying widow(er),

$122,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and

$10,000 for married filing separately and you lived with your spouse at any time during the year." - IRS Pub 590

2.I would really like the solo 401k, since from my undertanding you can contribute up to 50k a year?

Check out this link for the detailed calculations on limits. http://www.solo401kcontributionlimits.com/ (I am in no way affiliated with this organization).

3.for roth IRA, i believe i can contribute 5k a year..correct?

Yes you can typically only contribute 5k per year to a Roth IRA.

for roth 401k, i can contribute 17k/year..is that right? so can i have a roth and a solo 401k??

Yes that is true; however, your business can match retirement contributions. Yes, you definitely can; however, these would be required to be put into a traditional 401k account(The match would be pretax).

however, i also wouldn't mind throwing a little into a roth so it's all tax free when i pull it out.

You can contribute to a pretax account each year and then roll it over each year so you can effectively do both and supercharge your Roth account. The only problem with this method is those rollover contributions do need to be in the account for 5 years before you can pull them out without a penalty. This was designed to keep people from rolling over their 401k so they can take distributions without the penalty. You can do this; however, you just need to wait the 5 year period before pulling the contributions out.

Take a look at this link when you have a chance: http://www.smartmoney.com/taxes/income/the-perks-of-the-solo-defined-benefit-plan-18048/

-Steven the Tax Guy

Your guide to IRS laws, rules and regulations.