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Solo 401k Questions

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  • Solo 401k Questions

    Hi all, I had a question about solo 401ks that I cannot find the answer to online. I am a new attending physician and was hired as an employee (W2). My wife is currently a resident and we are both maxing out our 403b's through our employer ($18k each). I have heard on the website and the podcast that as long as you have some income that is not W2 (even through surveys), you can get an employer identification number from the IRS and open up a solo 401k. My questions are:

    1. Is there a minimum amount you need to make in order to be able to get an employer identification number and open a solo 401k?

    2. Is there a maximum amount you can contribute based on how much 1099 income you have? For example, if you make $600 of 1099 income, can you contribute more than $600 to the solo 401k?

    3. If we are each contributing 18k to our 403b's, what is the maximum we could contribute to our solo 401k's?

    I appreciate the help!

  • #2

    1. There is no minimum amount to open a one-participant 401k. I just happen to believe you should have $500+ to justify that you meet the 401k definition of a self-employed individual with earned income from a trade of business.

    2. If you have reached the $18K 2017 employee deferral limit, you can only make a maximum employer contribution of 20% of net self-employment earnings (net business profit - 1/2 SE tax). All contributions to a one-participant 401k must be based on your net self-employment earnings and cannot exceed your compensation.

    3. A 403b is considered controlled by the participant. Any 403b employee + employer contributions must be aggregated with the employee + employer contributions of any participant owned businesses. So if you just have 403b $18K employee deferrals and no 403b employer contributions, your one-participant 401k employer contributions would be limited to $54K - $18K = $36K for 2017.


    • #3
      1. No
      2. "Employer" contribution: 20% of net profits, defined as income, minus expenses, minus half of self-employment tax (prob around 18.47% of income if you're below SS limit). You can also put in a total of $18,000 across *all* 401(k)/403(b) accounts *combined* as "employee" contributions. You can't contribute more than you earn.
      3. See #2. If you earn $600, you can probably contribute about $110.82.