I have a 401k from work that I will have to move out of the company's plan. I am fortunate to be in a position where my side income places me above the modified AGI limit for standard Roth contributions. Therefore, I am looking for a way to manage my 401k after leaving my job that allows me to continue making backdoor Roth contributions. As I understand, this rules out the use of a traditional IRA due to the potential mixing of pre-tax and post-tax when attempting a backdoor Roth.
From my research, it looks like setting up a solo 401k may be the way to go here. However, first I'd like to get some feedback on this idea and also air out some thoughts in case I am overlooking some obvious pitfalls.
The benefits of moving my work 401k to a solo 401k are:
- Continue building up retirement assets in the solo 401k, with a higher yearly contribution limit compared to a tIRA.
- Allow yearly backdoor Roth contributions.
Assuming I am taking in self employment income, the next question is whether to simply declare it as self employment income or to form an LLC. Additionally, the LLC could file to be taxed as an S Corp, which would limit FICA taxes to salaries and not the pass-through income. However, it looks LLCs that file for S Corp tax status will also have to file additional tax returns and pay additional commercial activity tax (at least in my state), so perhaps it may not be worth it in the end?
Please let me know any thoughts you may have about the solo 401k or LLC, or any other ideas related to this situation. Thank you.