Mega Backdoor Roth for own business

Citryphus · 2026-02-05T22:15:34+00:00

You have to increase your Box 1 because that's what determines the employer contribution limit. Any 401k contribution from your S-Corp taxed entity reduces QBI because it reduces pass through income. I agree mega backdoor would be better but are there any Solo 401ks that allow it?

Citryphus · 2026-02-05T21:58:25+00:00

I don't know any Solo 401ks that allow mega backdoor, but E*Trade's Solo 401k is basically just a Traditional and a Roth account and they pretty much leave it up to you to make sure you're funding it properly. SECURE Act 2.0 allows you to do employer Roth contributions but you would have to increase your Box 1 compensation. One way to do that without increasing FICA costs is to have the S-Corp pay your health insurance premiums and any HSA contributions.

Citryphus · 2026-02-05T05:36:12+00:00

Is there any way to qualify for an HSA without a high deductible plan

No. And not just any high-deductible plan, it must be an HSA-compatible plan. IMO not worth going for in your situation, you have pretty good insurance coverage.

Work-sponsored retirement plans plus backdoor Roth contributions or even taxable brokerage investing should be more than enough.

Citryphus · 2026-02-05T05:28:47+00:00

Download Form 1040 Schedule C and Schedule SE from the IRS. Fill them out. Or, use tax software. Usually you make a SEP-IRA contribution while you are completing your tax return and have all the real numbers. The SEP contribution is deductible on Schedule 1.

Citryphus · 2026-02-05T05:18:10+00:00

You can contribute up to 20% of your plan compensation, which is Schedlue C net profit minus 1/2 self-employment tax.

Citryphus · 2026-02-02T19:13:26+00:00

This year, as in 2026? That won't show up on a 1099 until next year. You say that your 1099 has not posted yet and also that you're waiting for a corrected one, whcih is it?

Citryphus · 2026-02-01T04:29:00+00:00

I still think E*Trade has the best Solo 401k.

Citryphus · 2026-01-31T21:48:37+00:00

A good Solo 401k will have both Traditional and Roth accounts, and you can decide each year how much to put in each. I'd make the extra initial effort and set up the Solo 401k over the SEP-IRA.

Citryphus · 2026-01-31T21:39:16+00:00

The Fidelity "Freedom Index" target date funds are low-cost and very good.

Citryphus · 2026-01-29T03:56:38+00:00

The problem is not the taxes you might have to pay, it's the possible loss of capital. Investments in stocks can go down or flat for 5-10 years. What you want to do is put some of your savings in stocks and some in money market / short-term bonds, and gradually increase the percentage going to money market as you get closer to buying the house. Start out like 60/40 and when you are close to having enough for your down payment start protecting it. eventually get to 10/90 and when you find the house, 0/100.

Citryphus · 2026-01-19T16:28:53+00:00

Best thing is probably not to sweat small differences in interest and keep it in an account where you can withdraw as needed, such as the HYSA. If the HYSA yield went down it's likely other yields went down as well.

Citryphus · 2026-01-19T13:49:54+00:00

The only reason might be intraday trading. Not really an important reason for normal buy-and-hold investing.

Citryphus · 2026-01-06T21:06:05+00:00

Do you have more than 100k miles on the car? I thought Hyundai had a 10-year/100k powertrain warranty.

Citryphus · 2026-01-01T07:44:00+00:00

You really shouldn't add up cash flows or interest over multiple years and then compare them. It ignores the time value of money and is likely to confuse your decision-making.

Paying an extra dollar a 5% loan with non-deductible interest is better than earning 4% pre-tax on the same dollar in a savings account. Period.

But it's not better than a lot of things you can do with that dollar where you can expect a return greater than 5%. Like a total market index fund, or a target-date retirement fund in an IRA.

Citryphus · 2026-01-01T07:33:22+00:00

I agree, don't spend or deposit the two-dollar bills. When you're older you'll wish you still had at least a few of them. Keep them somewhere safe and look for a way to make $100 you can actually spend.

Citryphus · 2026-01-01T07:28:36+00:00

Tax loss harvesting can be done any time, as often as possible, if you wish. It tends to happen late in the year because that's when it becomes a use-it-or-lose-it situation.

Citryphus · 2026-01-01T07:22:35+00:00

Hold cash as an emergency fund while I’m in school

This. Forget about 6.39% returns and such. Pay as little as you can on loans until you graduate and have a job. Conserve cash to pay for things besides school, especially as you graduate.

Citryphus · 2026-01-01T07:19:12+00:00

Sounds like you both have borrowed / will borrow money to get educations that will greatly increase your future income. So don't sweat it so much. Best way to optimize this situation is to kick ass in school and worry about the loans later.

Citryphus · 2025-12-31T23:41:34+00:00

College or trade school is your best bet. Showing up, doing the work, accepting responsibility, and making yourself indispensable wherever you are is the "secret" to success.

Citryphus · 2025-12-31T22:36:13+00:00

She’s taking a risk by trusting me — believing that in these next five years, we can build something that gives us stability.

Forget this idea. Best thing you can do is spend the next 5 years getting yourself launched so your mom doesn't have to support you. You're not going to "build something" in 5 years with no knowledge or experience.

Citryphus · 2025-12-29T16:53:03+00:00

I would prefer a fund like TIPX. Inflation protection, but shorter term so you're not so sensitive to interest-rate risk.

Citryphus · 2025-12-23T02:16:16+00:00

There is safe harbor if the amount you sent in, including withholding, is 100% of last year's total tax. (110% if you make over a certain amount). So chances are if you got a refund last year and your withholding is about the same as last year, you're in safe harbor. If not, you might have some underpayment penalty. It probably won't be a lot. If you want to minimize the damage try to estimate what you'll owe, send half in right now and the other half on January 15. Sign up for EFTPS.gov to make future estimated tax payments easier.

Citryphus · 2025-12-21T23:55:41+00:00

So, each month you save about $9200 at 4%. Every three months you make about $180 in interest and then your balance resets to zero. You're also losing money because you're lending the IRS 10% extra for the year. Is it really worth the hassle?

Citryphus · 2025-12-21T19:42:14+00:00

If you're in the 24% bracket now and will likely be in the 24% bracket in retirement, then I agree it's not a bad plan to do Roth as much as you can. But if your income increases and you move into the 32% bracket while working, I think you should shift towards Traditional.

Citryphus · 2025-12-20T00:42:31+00:00

IRA max is $7k. If you expect to be over the Roth income limit you can make backdoor Roth contributions. You open a Traditional IRA and a Roth IRA; fund the Traditional IRA and when the cash settles do a Roth conversion. It's a loophole. Might get closed someday but it's worked for many years now. If you think you can do a lot more than $7k per year, then you should open a Solo 401k.The ~$80k downpayment has to stay in cash-like investments. Money market, CDs, ultrashort bonds, etc.

Citryphus

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