Avoiding higher monthly REPAYE payments from moonlighting income

[treemantyler]

Hey guys,

I was thinking of how to avoid an increased monthly REPAYE payment if I choose to moonlight as a 2nd and 3rd year resident. What I was thinking was just contributing 100% of my moonlighting income (most likely only 1-2 shifts per month) to a tax deductible 401K, which may have to be a solo 401K considering, I assume, the moonlighting places won't offer me a traditional 401K. This way my REPAYE payments would only be based off my residency AGI. I just don't want to spend my extra time moonlighting if it turns out it's not worth it in the end by having higher monthly payments from the higher AGI. Does this sound like a feasible option or is there something I'm misinformed on?

Thanks for your time, Tyler

[wa2106]

Sounds like a very reasonable plan.  Another options is that if you're not maxing out your residency-offered 401k and it has good investment options you should be able to contribute to that rather than opening an individual 401k.

[cgossage]

I assume you are pursuing PSLF?  If so, you could do a Solo-K, Residency 401(k) or Traditional IRA depending on the amount.  Contributing to your residency 401(k) the amount you are making moonlighting will get you to the same place.  REPAYE simply looks at your combined AGI, so it doesn't really matter if the 401(k) is at your residency or a solo-k k unless you are looking to go above the $18,500 individual contribution limit.  If the amount is only going to be a few thousand, a Traditional IRA may be a good option.

If you aren't going to pursue PSLF, you may be better off putting the money in a Roth at your career stage even though your monthly payment might be a little higher.

[treemantyler]

Thanks for the responses guys. I have a residency Roth 401k (also have an individual Roth IRA) that I put 10% of my residency salary in. There is also a traditional 401k option; however, I'm not sure I would be able to contribute outside moonlighting income to the residency accounts, unless I'm mistaken. If so, seems like the solo 401k or the traditional IRA would be the only tax deductible options.

[cgossage]

That helps clarify. Yes. A solo-k would be a great option for you.

[nachos31]

You are correct in that you cannot contribute your moonlighting income directly to your residency 401k, but you can increase your 401k contribution to a level commensurate to your expected moonlighting income. For instance, if you expect to make an additional 10% income from moonlighting, then increase your 401k contributions by 10% to 20% and you have the same effect.

[treemantyler]

That's actually a great idea! Of course I would have to add a traditional 401K to my residency retirement company but that shouldn't be a problem. Thanks for the advice!