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  • Maximum 401K Allocation

    I keep hearing about maximum allocation of $54K into 401K.  However, my 401K plan is telling me maximum of $26K as of last year.  I used to have a 403b and maxed that out (2007) at $44K.  I have money I want to invest into these accounts but can't seem to find someone on other end of phone that understands how to help.

    Additionally, this is funded through my own business and I also have a fee-for-service business that is separate.  I wanted to set up a second 401K to maximally fund as well but was told that I couldn't - presumably because I am single provider of my practice and the two are lumped as sole proprietorship.  Should/could I change my PLLC to a partnership with my wife and receive that salary as an Scorp?  Then be able to fund both - -$104K???

    It wasn't as much of a concern when bootstrapping my practice a few years ago but now I am making good money and I have money I want to save as smart as possible.

  • #2
    So are you the 100% owner of both businesses? What does that mean by saying "my 401k plan is telling me..."? Does that mean you are managing the 401k on your own and this is the amount you have calculated?

    Your 2 businesses will be treated as 1 for 401k calculation purposes. You cannot contribute more than $54k in toto ($60k if age 50+). Having your wife as a partner/s-corp owner may or may not accomplish your goals, depending on your specific facts and circumstances. If you get divorced, for example, it could be a disaster. But, yes, you could hire your wife (or go into partnership) and fund a 401k for her, too.

    With the dollar amounts you are throwing around, I honestly think you could benefit by paying for some quality professional advice beyond the customer support line.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3




      I keep hearing about maximum allocation of $54K into 401K.  However, my 401K plan is telling me maximum of $26K as of last year.  I used to have a 403b and maxed that out (2007) at $44K.  I have money I want to invest into these accounts but can’t seem to find someone on other end of phone that understands how to help.

      Additionally, this is funded through my own business and I also have a fee-for-service business that is separate.  I wanted to set up a second 401K to maximally fund as well but was told that I couldn’t – presumably because I am single provider of my practice and the two are lumped as sole proprietorship.  Should/could I change my PLLC to a partnership with my wife and receive that salary as an Scorp?  Then be able to fund both – -$104K???

      It wasn’t as much of a concern when bootstrapping my practice a few years ago but now I am making good money and I have money I want to save as smart as possible.
      Click to expand...


      If you have two different businesses, you can potentially have two different 401k plans, however, controlled group rules do apply, and we need to get the facts straight because this will dictate what you can and can't do as far as setting up and funding multiple plans.  While you can have two $54k limits for unrelated businesses, if you have a controlled group you only have a single $54k limit, and if you have separate plans, in a controlled group both plans have to be tested together, so if one or both businesses have staff, you will definitely need to follow the rules and make sure that both plans are set up in accordance with the law (otherwise you might have to make corrective contributions to the staff).

      Just because you have two separate businesses does not mean you can have two $54k limits.  If you own 100% of both businesses, you have a controlled group. This just means that it might be a lot more cost-effective to have a single plan. You can indeed add your spouse to the payroll, but you have to be very careful to make sure that her salary is reasonable, which probably means that she won't be able to max out at $54k.
      Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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