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Initial business and retirement plan setup for psychiatrist

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  • Initial business and retirement plan setup for psychiatrist

    Hi, my sister is a psychiatrist whom I am helping along with a diy approach to her investing and retirement. We are both very comfortable with most all aspects of everything except the initial setup of her retirement accounts. For me I just have a profit plan from my group and back door roth. I have been diy for 7 years but didn’t have to worry about the initial setup she is now doing after finishing residency this year..

    She works 3 part time jobs.
    Job 1 is part time w2 and she earns about 50k. Not eligible for any benifits or retirement plans through this hospital.
    Job 2 is independent contractor job.1099 Income 60k
    Job 3 unralated hospital. 1099 Income 160k
    She just setup a solo 401k with vanguard. She has a roth from residency and wants to also continue back door Roth IRAs.
    Question #1. How does she do her contribution? All employer or does some have to be employee?
    #2. Could she open a separate retirement account for each of her 2 separate independent contractor jobs? Would this increase the amount she could put away tax deferred?
    #3. Is the 20% of income she can put into the 401k based on all her income or just the 1099 income?
    #4. Any significant reason for her to incorporate? Right now she is just 1099 income to herself.
    Thanks. I have leaned a ton from this forum and trying to help her get onboard also.


  • #2
    Sounds like you are giving her great advice and are on the right track.

    1. She can contribute a 18,500 employee contribution and 20% of her net 1099 income as an employer contribution. The combined maximum is $55,000.

    2. The combined income from the 1099 jobs will be used to determine what she can put in her Solo-K, not separate plans for each income source. It’s effectively a plan for her own business.

    3. Just 1099

    4. No. It works well in other industries as a way of reducing self-employment taxes, but wouldn’t be a good fit in your sister’s situation because of her current W-2 income and overall income levels.


    • #3

      1.  For 2017, she can contribute $18k to her solo-k as an employee. This amount is due to be deposited with her custodian by 1/15/18.

      2. For 2017, she can contribute 20% of her net profits* from 1099 income, up to $36k. This amount must be deposited by the due date of her income tax return, including extensions.

      3. Only 1 account and, no, separate accounts would not change her maximum contributions.

      4. She should probably remain a sole proprietor as incorporating will likely cost her more than it would save her. Be sure she has adequate malpractice insurance for all of her jobs.

      * Net profit is the total IC income of $220k less related business deductions, such as licenses, CME, home office, etc.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


      • #4
        Thank you both very much. That’s exactly what I needed.