401-k roth for high income business owner
Had lunch with friend Fri. who owns a small business with salary and business
dividends in mid 6 figures. Told me about his business ‘s 401-k roth plan and all but called him crazy due to everything I’ve read or heard indicated the income restrictions placed on roth’s would prevent him from participating. Called his adviser last nite and was shocked to hear…
1. There is no income limit for a business owner .
2. The adviser further explained how he could set up yet another type plan/instrument that would allow over $100,000 to be tax deductible into a pension plan but would require a life expectancy guy to run #’s each year and file some paper work . This would cost several thousand $ per year.
This doesn’t seem right.
Can anyone shed insight on either issue above.
Thank You
NP
Permalink Submitted by Alan Spross on Sat, 2008-04-19 18:12
With respect to designated Roth accounts (solo K, 401k, Roth 403b etc) the Roth IRA income limits do NOT apply to contributions.
However, until an unintentional glitch in the tax code gets repaired, there is a 100,000 modified AGI limit in place to transfer the employer Roth to a Roth IRA. This should be fixed in the next technical corrections bill.
Permalink Submitted by Al Fry on Sun, 2008-04-20 01:19
#2 could be a 412(i) plan, or a Defined Benefit Plan. Both need a QRP person to set up. The IRS scutinizes 412(i)s very carefully, so he should get expertise in that area.