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  • SEP for all?

    First post on the forum.  Reader for about a year, and surgical resident.

    With physicians being excluded from tax free contributions to traditional IRAs due to too high of income, backdoor roths seem like the best bet.  However, with the ability of small business owners to contribute to SEP (traditional IRA-type tax deferred) accounts nearing $50,000 a year, tax deferred, why shouldn't I just start an LLC and start SEP account?  Does the money contributed to SEP account need to come directly from business income or can I legally transfer from personal account to business account and then put into SEP? It seems like there has to be something that I'm missing, or not understanding.  Thoughts?

  • #2
    You have to be self employed to be able to claim a SEP or i401k, which is 53k max contribution at this time. Having an LLC really has nothing to do with it. No one checks where the money came from, but you have to generate enough income to contribute the max amount, which is around 260k. If you make less you cant contribute more than the formula allows.

    Otoh, that doesnt mean those are the only types of accounts physicians have for tax deferral, even if employed a combination of 401ks, profit sharing and other numbered accounts can get one to 53k.

    Since youre a resident you dont really have much choice at this time unless youre moonlighting and generating a 1099. Otherwise it will depend on where you end up, but retirement plan options are definitely something to inquire about when on the search.

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    • #3




      First post on the forum.  Reader for about a year, and surgical resident.

      With physicians being excluded from tax free contributions to traditional IRAs due to too high of income, backdoor roths seem like the best bet.  However, with the ability of small business owners to contribute to SEP (traditional IRA-type tax deferred) accounts nearing $50,000 a year, tax deferred, why shouldn’t I just start an LLC and start SEP account?  Does the money contributed to SEP account need to come directly from business income or can I legally transfer from personal account to business account and then put into SEP? It seems like there has to be something that I’m missing, or not understanding.  Thoughts?
      Click to expand...


      Do you mean you are also a small business owner in addition to being a surgical resident? If so, yes, you should start an LLC or S-corp and set up a SOLO-k if you are the sole employee (other than your spouse). I won't go further until you verify that my presumption is accurate.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        To personalize the question: Yes, i just formed LLC for small business, unrelated to my profession.  I am sole employee and will always be.  I have independent contractors but no true employees.  Should I preferentially used business-type traditional IRAs or personal?

        My real question for the forum was, if the business model traditional IRAs are preferred (assuming the answer to above is: "use business IRAs"), then why doesn't everyone create LLC with them as the "business" (as physician), and use the same business type IRAs?

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        • #5




          To personalize the question: Yes, i just formed LLC for small business, unrelated to my profession.  I am sole employee and will always be.  I have independent contractors but no true employees.  Should I preferentially used business-type traditional IRAs or personal?

          My real question for the forum was, if the business model traditional IRAs are preferred (assuming the answer to above is: “use business IRAs”), then why doesn’t everyone create LLC with them as the “business” (as physician), and use the same business type IRAs?
          Click to expand...



          • There is no such thing as a "business model traditional IRA".

          • Everyone cannot create an LLC because everybody does not own a business. iow, a physician who is employed by a group or a hospital is paid via W2 and is limited to the plan offered by the employer.

          • You, otoh, can set up a SOLO-k since you do own a business. Does not matter if the business is related to your profession. Need to be sure your IC's are qualified to be paid that way, however, or having a SOLO-k and not allowing "employees" to participate will be only one of many problems you could potentially be facing.

          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            Does the income for SOLO-k have to come from the business or can I, for example, come from my salary as a physician?

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            • #7




              Does the income for SOLO-k have to come from the business or can I, for example, come from my salary as a physician?
              Click to expand...


              The SOLO-k contribution is based upon the income from your business, not your main W2. The income from your "day job" determines the amount you can contribute to the "day job" 401k.

              You can contribute from any pool of $$ you want, of course.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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