After tax 401k

[pdoc]

Hello everyone!

New to this blog, thoroughly enjoyed a lot of posts!

Pdoc has been a nephrology attending for almost 3 years now and is a W-2 employee. He maxes out his employer sponsored 401 k ( pre-tax, no roth/after tax option) and does his backdoor Roth conversion religiously every year.

I have been looking into contributing to the after tax 401 K. My employer 401k plan has no such option. Do you guys have any idea if I can open up a after tax 401k on my own, say with Vanguard? Would I need to have an LLC/corporation etc and set up a 401k plan or can I do that solo as well?

 

[spiritrider]

You can not adopt an employer sponsored retirement plan unless you are an employer. Self-employment income will accomplish this and you could set up a one-participant 401k. There is no need for either an LLC and/or S-Corp to do this.

However, there are two issues that will probably prevent you from taking advantage of after-tax contributions like you are thinking:

1. None of the mainstream one-participant 401k plan providers allow after-tax contributions in their plans. You would have to have to get a plan from a Third Party Administrator (TPA) that allowed after-tax contributions. This will not be free of administrative costs like with the mainstream providers. Think a ballpark of $1K/year or more.


2. All employer sponsored retirement plan contributions are limited to the compensation from that business. If your compensation from that business was $1K, your after-tax contributions would be limited to that $1K. None of it could be based on your other W-2 income.

[pdoc]

Thank you for clarifying. That is helpful!