how long do you expect your dental career to last?

[Shunwei]

After about 180k in income you can't contribute to a Roth. And if you have a small account balance it will get eaten up with fees.

Exactly, I already exceed that so I assume that's no longer an option?

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[Glimmer1991]

Yes. 5.5k is the max contribution to an IRA (assuming you're under 50). If you plan to make over 181k in income, then it would probably be wise to look at other options outside of a Roth.

You can convert your 401K balance to a ROTH IRA, which is a loophole around the 5.5 max contribution. You simply have to pay taxes on the conversion amount.

I know that my spouse and I will almost immediately be above the income threshold for a Roth upon graduation, so I've never looked into them much. I have definitely seen the term "backdoor Roth" thrown around quite a bit, though.

So, let's say that as a practice owner, I participate in a Vanguard Small Plan 401k. I put in the max $17,500 a year. I could convert all of that over to a Roth and just pay taxes on it at my current tax level? ...or could I only "backdoor Roth" $5,500 of it (yes, I just used that as a verb, hah!).
https://investor.vanguard.com/what-we-offer/small-business/compare-plans?Link=facet

Even more questions...

For a dentist owner with ~8-12 employees, is there a specific retirement plan that is typically the best way to go?

Also, after you put in the 17.5k a year to the 401k, where do you put the rest of your money? Taxable accounts? I think I hear about people putting more money than 17.5k into "retirement accounts" yearly, though... how do they do that? Or am I just misunderstanding them?

Thanks! I'm a financial "newbie" here, but I'm diligently trying to learn more.

 

[Shunwei]

Above 181k you are no longer eligible, I would look at other options to save. Do you have an emergency fund built up (6-12 months income in savings)? That liquidity is important to have.

Absolutely, I have about 15k in cash and quite a bit more in liquidable assets. I am not worried about that. I was looking at a SEP IRA for my office but it's hard to get a consensus from everyone on how much they like to put in, so I might stick with a business simple IRA. My CPA recommended against a 401k for the paperwork and costs.

 

[Silent Cool]

I know that my spouse and I will almost immediately be above the income threshold for a Roth upon graduation, so I've never looked into them much. I have definitely seen the term "backdoor Roth" thrown around quite a bit, though.

So, let's say that as a practice owner, I participate in a Vanguard Small Plan 401k. I put in the max $17,500 a year. I could convert all of that over to a Roth and just pay taxes on it at my current tax level? ...or could I only "backdoor Roth" $5,500 of it (yes, I just used that as a verb, hah!).
https://investor.vanguard.com/what-we-offer/small-business/compare-plans?Link=facet

Even more questions...

For a dentist owner with ~8-12 employees, is there a specific retirement plan that is typically the best way to go?

Also, after you put in the 17.5k a year to the 401k, where do you put the rest of your money? Taxable accounts? I think I hear about people putting more money than 17.5k into "retirement accounts" yearly, though... how do they do that? Or am I just misunderstanding them?

Thanks! I'm a financial "newbie" here, but I'm diligently trying to learn more.

If you have a self-funded 401K I believe that you can put 52K into that or into a SEP-IRA, and I believe you can simply pay conversion taxes on this every year in converting it to a Roth IRA.

 

[Glimmer1991]

If you have a self-funded 401K I believe that you can put 52K into that or into a SEP-IRA, and I believe you can simply pay conversion taxes on this every year in converting it to a Roth IRA.

Aha...

I think you're right. The verbiage for the SEP-IRA says,
https://investor.vanguard.com/what-we-offer/small-business/compare-plans?Link=facet

Employer contribution limits for 2014:

• Up to 25% of the participant's compensation or a maximum of $52,000 for 2014, whichever is less.
• Contributions are deductible as a business expense and aren't required every year.

So theoretically, you can contribute 52k/year. But if you only made 100k in a year, for example, you couldn't contribute any more than 25k. Gotcha.

Edit: If you go this route, though, it looks like your employees could only contribute 5.5k a year to their plans. Wouldn't it be better to go with something like a Small Plan 401k that would allow your employees to contribute 17.5k a year? That just seems a bit "nicer" of a thing to do for your employees.

However, that plans says that,

Employer contribution limits for 2014:

• Overall employer plus employee contribution limit is 100% of compensation not to exceed $52,000 for 2014 ($57,500, if the individual is age 50 or older).

So that means that if you contribute to your employees' retirement accounts, the dollar amount you include is subtracted from the 52k you could put into your own? Well, if so, that stinks.

 

[Silent Cool]

YES. They're in economically depressed area but not anywhere as bad as Detroit or Camden.

YES . Airbnb, vrbo, and redweek are great for vacation rentals. My next vacation is booked thru them.

You got a great thing going with constructing and expanding your dental practice empire. I don't think anything else is as safe nor as profitable.

http://www.theonion.com/articles/airbnb-user-loves-how-easy-website-makes-it-to-eja,35949/

 

[Silent Cool]

Well played, @yappy , well played