I recently got a 1099 job as a side gig projected 150-200k 1099 as well as a W2 projected 100-120k this year

My question since I am new to investing is can I create a 401k that my W2 job matches, and also open up a SEP IRA to deduct 25% of my 1099 (~50-60k) AND also have a roth IRA? Or do all of these conflict with one another?

Also what trading platform to recommend to buy ETFs from?

Thanks!

https://www.irs.gov/retirement-plans/how-much-can-i-contribute-to-my-self-employed-sep-plan-if-i-participate-in-my-employers-simple-ira-plan
https://www.reddit.com/r/tax/comments/11xvyh0/401k_roth_ira_and_sep_ira/

Seems 401k + Roth IRA (Backdoor in your case) + SEP IRA is allowed.

May have to get accountant or lawyer to help set things up if you are too busy. Your 20 hours learning how to do it with your income may be better just paying someone experienced 1-5 hours.

#1 Vanguard
#2 Fidelity

In my opinion these are the best.
Vanguard is private, by buying their funds, you own the company.
Fidelity is traded on the stock market and will try to profit off you by selling you products. They do it in a nice way though. I really like them.
I've used both and like them a lot.

As for funds. check out reddit bogleheads or buy target date funds/broad ETF that match S&P500 or US total stock.
Adding international or bonds is an option.
The choices are mostly personal.

Please double check me, I am not a financial advisor. Just a finance dork who only works W-2.

Side note: I know your new at earning income. Stacking some emergency cash, down payment for house, car etc is also a great idea.
No need to optimize perfectly with your cash flow.

This post was edited by d2rph on Mar 30 2024 01:24pm

thank you!!!!!!!!

Your w2 income shouldn’t be used for your ira, because max contribution is divided between employer and employee , the total combined coming to 69k. You can figure out if you want traditional IRA vs Roth , but the 69k is the max you can contribute regardless

So your 1099 income should all go to your back door Roth ira. This is not income you can write off , it’s post tax income

Your 401k you should have some matching with your w2 income? Max whatever you can here to get maximum match. It will still come up short to maximum of 401k contribution allowed (employer +employee) so to max it use 1099 funds which you can then deduct

I use a CPA , best few hundred I spend, saves me a lot of headache.

As far as brokerages and etf, fidelity and VOO is what I do for all my retirement. Manage back door Roth and 401k all there

Ps grats on all your hard work

This post was edited by Bazi on Mar 30 2024 02:46pm

that makes sense. thanks bro!

you wouldn’t mess with the SEP IRA to write off 25% of the 1099 income?

your cpa familiar with california taxes lol? might just use cpa but was wanting to start all this by the time i have to use them at the end of the year unless they also help with creating all this confusing shit

This post was edited by Physician on Mar 30 2024 02:51pm

Midwest definitely different tax environment than Cali. Would ask your friends for a trusted cpa that you can meet face to face

There is not a right /wrong answer with traditional ira vs Roth ira. Similar to Roth 401k vs traditional 401k

If you can afford it , Roth accounts are better long term especially when you consider mandatory withdrawals that will kick in during your later years , and overall likely to reduced in decreased tax burden

With that said you are only in your 30s once and if we have money we know how to use it lol

Personally My 401k is traditional and my Ira is Roth

All really depends on how much excess monthly cash you have and what are you doing with it. I know you don’t have kids yet but if/when that time comes, those little things are costly . Childcare for 2 is basically another mortgage payment

But whatever you decide isn’t set in stone. You can change your distribution at literally anytime

So tldr just depends on your immediate goals and monthly excess cash. If you can afford Roth retirements for everything, I would personally. You will likely have 8 digit accounts the time you’re 60 and the mandatory withdrawals will be fat. Realistically you’re never gonna be in the lower tax brackets again because even in retirement there’s income options

my plan was to be aggressive and put in 60k into a SEP IRA and max out my 401k with employer match for this year and let that cook for the upcoming years since like you mentioned no kids or rent or mortgage so i can be really aggressive right now vs 5 year down the line prolly won’t be putting that much into it d/t kids etc.

tldr pretty much no expenses right now besides student loans so i want to invest a lot and get a fat tax cut instead of blowing it on stupid shit and/or paying uncle sam

I see you didn’t mention SEP IRA is this because you are strictly W2? Sep IRA would be better in my situation currently because of the 1099 and limit up to 50-60k vs a Roth IRA is only a couple grand and can’t tax write it off.

I don’t plan on having the side job 1099 for more than 2 years so that’s why i’m trying to tax write off as much as I can hence Sep would be the smarter option here?

Yep sadly I’m w2 rvu model so my Roth IRA retirement is capped at like 6500 or whatever

Can you not put your 1099 (69k) into Roth IRA? You won’t get tax write off right now but ur gonna be so huge in a couple decades

i’ll have to ask about this that’s what i was confused about, from my understanding like you mentioned the roth IRA only limits to 6500$ and doesn’t effect taxes vs a Sep IRA tax deductible and up to 25% of your 1099 income limit or 60k max which ever is less is the limit.

In this case 50-60k AND tax deductible from the 1099 salary. This was the only reason I was interested tbh lol is the fat tax write off.

This post was edited by Physician on Mar 30 2024 05:55pm

If you look up mega back door Roth , that’s the 69k that can be funneled into your Roth IRA , for 1099 earners. It’s my impression you don’t need a traditional Ira to maximize the 69k limit but can do in Roth as well. Find a good cpa that works with docs imo. Lmk what you find out! Even if you’re 1099 just for a few years and can throw huge contributions to your Ira for a few years, that will set you up so well in life to come. Took my 5 years to get my Ira to 6 figures and u can do it in 2