Rollover of personal 401(k) to a Roth for the first year of work

[The PA Investor]

I just started a new job and get paid with 1099. I was thinking of opening up a 401(k) and contributing the max I can as a sole proprietor. Since I'm a new grad and will only be working half the year, I thought it would be a good time to roll that over to a Roth IRA and pay the taxes on it since I'll be in a lower tax bracket this year. Any thoughts about this would be great. Thank you.

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[RangerBob]

You can contribute directly to a Roth IRA if you’re under the income limit. If you do a rollover you usually do it from another IRA

Many individual 401k plans allow Roth contributions, like Vanguard. I have my solo 401k with them, so I have a traditional and a Roth 401k. Plus I have my Roth IRA with them as well, but I make too much to contribute directly to that anymore

 

[FutureInternist]

You can contribute directly to a Roth IRA if you’re under the income limit. If you do a rollover you usually do it from another IRA

Many individual 401k plans allow Roth contributions, like Vanguard. I have my solo 401k with them, so I have a traditional and a Roth 401k. Plus I have my Roth IRA with them as well, but I make too much to contribute directly to that anymore

My understanding is that despite the income limitations you can still make contributions to an IRA as a “backdoor Roth IRA”.

Make the usual contribution to an IRA and then “convert” it to a Roth IRA a day later.

 

[RangerBob]

My understanding is that despite the income limitations you can still make contributions to an IRA as a “backdoor Roth IRA”.

Make the usual contribution to an IRA and then “convert” it to a Roth IRA a day later.

Yes, though I’ve yet to do this personally.

 

[dpmd]

Is there a reason you don't want to open a solo 401k that has a Roth option?

 

[ThoracicGuy]

I just started a new job and get paid with 1099. I was thinking of opening up a 401(k) and contributing the max I can as a sole proprietor. Since I'm a new grad and will only be working half the year, I thought it would be a good time to roll that over to a Roth IRA and pay the taxes on it since I'll be in a lower tax bracket this year. Any thoughts about this would be great. Thank you.

I would open the solo 401k and then KEEP it open. Use it to move any traditional IRA monies to hide from the pro rata rule for the Backdoor Roth if that applies to you. Plus, you never know when you may get 1099 money and be able to contribute, even if you have a W2 job in the future. You can find solo 401k plans that have a Roth option as well, as @dpmd said.

(And yes, I know this reply is about a month old!)