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From W2 to IC Switch Retirement Options

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  • From W2 to IC Switch Retirement Options

    Hey gang,

    Please allow me to be real with y'all. I've loved this forum for many years and have learned a ton thanks to y'all's amazing expertise in so many areas of my life. Now it's my first time asking questions and not because I'm too lazy to look up the answers, right now I just don't have the physical and mental energy to fully understand all the answers already shared relevant to my questions, so please, just bear with me LOL
    Ok, here we go... I'm now switching from my W2 job to an independent contractor one. Lots of fun, I know! It's freaking nuts all that goes into this transition, it's overwhelming and intimidating because I don't want to screw anything up and don't want to be taken for a ride in the process. Is it true that it's too late for me to set up a Solo 401k to contribute to this year after I'm done at my W2 job? What's the best way to save as much as possible for retirement the rest of the year?

  • #2
    You can set up a solo 401k for 2020 no problem. You have until 4/15/21.

    how much 1099 income are you expecting?

    did you already contribute to 401k at W2 job and if so how much in 2020?

    what about health insurance?

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    • #3
      Oh good, I'm glad to hear that! Thank you!
      It'll be at least 400k/yr.
      Yes, I'm maxing out my current 403b & 457b at my W2 job.
      I'm currently shopping for health insurance. Struggling to decide if I should go with a high deductible family plan and keep maxing out my HSA despite the really crappy coverage and ridiculous OOP or choose the premium plan for $500.00/month more but the coverage is much better for our family situation and minimal OOP expenses.
      Thank you jacoavlu for replying and any other feedback or tips is greatly appreciated.

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      • #4
        Beginning in 2020, you have until the due date of your income tax return, including extensions, to set up and fund a solo-k (previously, you had to set up by 12/31 of the year to which it applied). You’ll be able to contribute up to $57k, same due date.

        If you aren’t investing your HSA in a well-balanced portfolio to be used in the long term, you might as well be in the higher cost plan. If you are, then you need to do a cost-benefit analysis.

        If possible, designate an area of your home to be used exclusively as your home office.

        Don’t elect s-corp status until you are sure it’s the right move.

        Keep very good records and seriously consider hiring a CPA who has much experience in these areas,
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Originally posted by RIDGEM View Post
          Yes, I'm maxing out my current 403b &
          this is a very important piece of information

          your solo 401k annual addition limit $57k in 2020 is reduced dollar for dollar by any contribution employee and employer to the 403b

          also your employee deferral limit $19500 in 2020 is reduced dollar for dollar by any employee deferral contribution to the 403b, or any other 401k

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          • #6
            Originally posted by jacoavlu View Post

            this is a very important piece of information

            your solo 401k annual addition limit $57k in 2020 is reduced dollar for dollar by any contribution employee and employer to the 403b

            also your employee deferral limit $19500 in 2020 is reduced dollar for dollar by any employee deferral contribution to the 403b, or any other 401k
            Wow! Ok, thank you so much for pointing that out. Up until now things have been rather simple and straight forward for me, but this whole IC transition definitely complicates them.

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            • #7
              Originally posted by jfoxcpacfp View Post
              Beginning in 2020, you have until the due date of your income tax return, including extensions, to set up and fund a solo-k (previously, you had to set up by 12/31 of the year to which it applied). You’ll be able to contribute up to $57k, same due date.

              If you aren’t investing your HSA in a well-balanced portfolio to be used in the long term, you might as well be in the higher cost plan. If you are, then you need to do a cost-benefit analysis.

              If possible, designate an area of your home to be used exclusively as your home office.

              Don’t elect s-corp status until you are sure it’s the right move.

              Keep very good records and seriously consider hiring a CPA who has much experience in these areas,
              Thank you so much jfoxcpacfp . I very much appreciate your input and recommendations. I'll look into getting the proper help with all of this since I'm just terrified of messing and this is way out of my scope of practice LOL

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