Multiple Retirement Accounts

[erdocjde]

I had a question regarding multiple retirement accounts.

I currently max my 401K throught my primary employer, my IRAs, and my DB plan.  I also have a side LLC income where I have set up a SEP account and fund that at 20% of my total llc earnings.

Reading through this site, the internet, and through discussion with my accountant there seems to be various takes on this.  Some say that one can only contribute their one year contribution limit (53K) between the multiple accounts (I am referring only to the 401K and SEP or multiple 401Ks), while other state that you can max each account at the 53K?   Does anyone know the definitive answer on this one?

[jfoxcpacfp]

The definitive answer is: it depends on whether there is common ownership. If you are employed by an unrelated company (i.e. you don't own 80% of your employer) then yes, you can contribute up to $53k to the SEP and $53k to the 401k plan ($59k if you are age 50+).

[KarenPhD]

If I am understanding you correctly, you are funding your plans at work and have set up a SEP for your LLC.  You can fund a SEP for your LLC.  If you had a solo 401(k), you would be able to fund the profit sharing part but not the $18,000 salary deferrals. You can only do salary deferrals from one 401(k) at a time.  My company specializes in defined benefit and solo 401(k) plans and we set up plans for side income all the time.  If you wanted to put away more of the LLC income, depending on your age and income, you might be able to contribute and tax-defer a lot more than 20%.  Here’s a calculator – just enter your LLC net income for compensation.

http://www.onepersonplus.com/smallbusiness/pen.html

If you have more questions, you can talk to a plan consultant — no hard sell – at 866-269-2706.

Hope that helps.

[childay]

https://www.whitecoatinvestor.com/multiple-401k-rules/

 

The above about one 18k limit is correct..

[litovskyassetmanagement]

erdocjde wrote:

I had a question regarding multiple retirement accounts.

I currently max my 401K throught my primary employer, my IRAs, and my DB plan.  I also have a side LLC income where I have set up a SEP account and fund that at 20% of my total llc earnings.

Reading through this site, the internet, and through discussion with my accountant there seems to be various takes on this.  Some say that one can only contribute their one year contribution limit (53K) between the multiple accounts (I am referring only to the 401K and SEP or multiple 401Ks), while other state that you can max each account at the 53K?   Does anyone know the definitive answer on this one?

Click to expand...

If you already have a solo DB plan, your 401k contribution is limited to $18k + 6%, so you won't be able to contribute the full $53k.  Your employer's DB plan does not figure into the maximum contribution into your 401k plans.  If you have a solo 401k or a SEP and employer 401k, you can indeed contribute $53k into each, with $18k of salary deferral in common (between the solo 401k and employer 401k plans).  So if you contribute $18k into one plan (for example, employer's plan), the SEP or solo 401k would have to be funded with profit sharing entirely (so in that case, SEP is just like a solo 401k without the salary deferral) with a $53k maximum.

If you have enough income, I would instead go for a combo plan - a solo 401k with a solo DB plan.  You might also find it more beneficial to make the salary deferral into your own solo 401k plan rather than into your employer's 401k plan (where you might contribute just enough to get the match) because of better quality investment choices that you can get in your own solo 401k plan.  So there are multiple considerations here and not really enough information to provide a better answer.