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Solo 401k Advice

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  • Solo 401k Advice

    Hey all,

    This year I will be supplementing my employed income (235k) with about 90-100k 1099 income. I feel like it would be beneficial to open a Solo 401k in order to increase my tax-deferred retirement savings.

    To give a bigger picture of our current retirement savings: Through my employer, I currently only have a gov457b available to me, which I max out. I also max out backdoor Roth IRA for my wife and I, and she maxes out her 401k and HSA. So a total of around 60K saved here this past year. Total retirement savings about 135k all in tax-advantaged spaces.

    Questions:
    1. Assuming 100k in 1099 income, what is the roughly the max I could save in a solo401K? For 2021, $19,500+ "employer" contribution?
    2. What do the taxes look like for this additional income?
    3. Where is a good place to open a solo401k? I currently have Vanguard for Roth IRA and would like to keep with them if in my best interest, but open to starting one with another company if their plans are superior.
    4. Anything else I should be considering?

    Thank you for your time!

  • #2
    Questions:
    1. Assuming 100k in 1099 income, what is the roughly the max I could save in a solo401K? For 2021, $19,500+ "employer" contribution?
    - EmployEE: contribution - 19.5k
    - employER: remaining portion (38.5k).
    - total 58k

    you would need to open a solo401k that allows mega backdoor roth otherwise you will be under 38.5k.

    2. What do the taxes look like for this additional income?
    - it’s considered income. So you pay federal tax, SS and Medicare tax for employee and employer. Assuming you max SS through your current employer, it will only be federal and Medicare tax

    3. Where is a good place to open a solo401k? I currently have Vanguard for Roth IRA and would like to keep with them if in my best interest, but open to starting one with another company if their plans are superior.

    Can’t use vanguard. They don’t allow mega backdoor roth.
    i use fidelity. They are great.

    4. Anything else I should be considering?
    The only way to maximize your solo401k is to do a mega backdoor since your side gig is 100k. If you take this route, please read up on what this is and how to do it. There are plenty of posts on this forum.

    good luck.

    Comment


    • #3
      https://www.bogleheads.org/wiki/Solo_401(k)_plan

      Comment


      • #4
        Originally posted by WorkforFIRE View Post
        Questions:
        1. Assuming 100k in 1099 income, what is the roughly the max I could save in a solo401K? For 2021, $19,500+ "employer" contribution?
        - EmployEE: contribution - 19.5k
        - employER: remaining portion (38.5k).
        - total 58k

        you would need to open a solo401k that allows mega backdoor roth otherwise you will be under 38.5k.

        2. What do the taxes look like for this additional income?
        - it’s considered income. So you pay federal tax, SS and Medicare tax for employee and employer. Assuming you max SS through your current employer, it will only be federal and Medicare tax

        3. Where is a good place to open a solo401k? I currently have Vanguard for Roth IRA and would like to keep with them if in my best interest, but open to starting one with another company if their plans are superior.

        Can’t use vanguard. They don’t allow mega backdoor roth.
        i use fidelity. They are great.

        4. Anything else I should be considering?
        The only way to maximize your solo401k is to do a mega backdoor since your side gig is 100k. If you take this route, please read up on what this is and how to do it. There are plenty of posts on this forum.

        good luck.
        Thank you for all of the information. I'll look into Fidelity and definitely read up on mega backdoor roth. I've seen the term through WCI a million times, just never thought it would be applicable to me. Guess I was wrong!

        Comment


        • #5
          Thank you for the reference!

          Comment

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