If you want to avoid the pro rata rule, could you roll an existing tIRA into a solo 401k? If so, what would be the bare minimum requirements that need to be met to open a solo 401k? This would be for a stay at home spouse who doesn't currently work. Could they technically open a "consulting" business? Is there a minimum income they need to make? We're not talking about requirements to be able to contribute new money, we would really just need it to exist for a short period of time to get the money out of the IRA. Are there any downsides to doing something like this? Any reason it wouldn't be legal?

why do you want to avoid the pro rata rule? it’s annoying but you don’t pay any more taxes…

Because I'd rather pay taxes later than today. I will probably have the option in the future to keep my income bracket low at that point. Especially if I would have Roth money to play around with as well.

that is a good reason to try to avoid it haha 👍 don’t have anything to add regarding the solo 401k idea though. Tagging @eager-smartphone-39564

I can confirm that rolling IRAs into 401ks is normally the right thing to do for this, but I have no idea how to make your own 401k

oh that I have helped people do with fidelity. https://www.fidelity.com/retirement-ira/small-business/self-employed-401k/overview

Yeh it requires having your own business. Just not sure what the minimum requirement or possible downsides might be,

https://www.irafinancialgroup.com/learn-more/solo-401k/side-hustle-for-the-solo-401k/#:~:text=With%20the%20Solo%20401k%2C%20monies,on%20what%20to%20invest%20in.

Can you elaborate on what you are trying to do?

Create a business for a short period of time with the bare minimum requirements that would allow us to open a solo 401k to transfer the money out of a traditional IRA. This is to allow future backdoor Roth conversions while avoiding the pro rata rule.

Why do you say short period of time? I'd think this strategy would require keeping the 401k around for as long as you're still in the backdoor only bracket

Because the 401k wouldn't go away if you close your business. You only need the company so you can open the account and transfer the money over.

Don't you need the business to have money for it to be putting money into the 401k?

To contribute maybe, but I assume you can transfer from an existing IRA any amount.

Got it - yeah so definitely very conventional maneuver assuming the business in bona-fide. If its not and you get audited they could invalidate the 401(k) retroactively which would force you to clean up a huge mess but more importantly you would be in the fraud territory.

Right, so the question is really whats the minimum requirement to make it bona fide? I assume the persons intent doesn't really play into it.

So you just need to pay 200 bucks a year to stay active.

You probably also need some business activity as well. Either way it adds complexity which probably isn't worth it unless you have a large balance.

I don't think Starbucks would accept you.

Where did you read that a solo 401(k) needs to be rolled over for a non-operative business

This is one of the links https://ocho.com/learn/solo-401k-no-longer-self-employed

I don’t see anything addressing the thing we are discussing

As far as I know, there's no minimum amount of income required for a Solo 401k. Literally any amount of consulting income would work. Also, remember that businesses can always change what they do so if you do some bookkeeping one year and graphic design the next, your business is still in operation