GPGPParticipantStatus: PhysicianPosts: 186Joined: 05/02/2017
So I have a w-2 job and am starting a small 1099 side gig.
For better or worse, this year I’m going to limit 401k contributions to 19K total (need to deploy extra cash to other areas).
Scenario 1 – 19K as my employee contribution, no solo-401k. They put in 4% up to 275K of salary, and match 4% up to 275K of salary. In effect, this gets me 11+11+19K = 41K.
Scenario 2- contribute enough to max the employer match to the W-2 job (e.g. 11K), and deploy the remainder of the 8K to 1099 solo-401K. First, max the employer part (as reduces AGI), next max the employee part to the total 19K. So I would get 11+11+11 in the W-2 401K (max of 33K) and another 8K in the Solo-401k, plus the value of the reduction in AGI.
I presume scenario 2 is the way to go, unless the 1099 income is so small it’s not worth the paperwork. I looked at schwab – it appears there are no account fees – so doing scenario 2 seems a no-brainer.
Next step, of course, is maximizing 401K employee contributions and employer contributions.August 23, 2019 at 5:05 pm MST #241140DavidGlennCPAParticipantStatus: AccountantPosts: 60Joined: 06/12/2019
I would put the full $19,000 with your W-2 job’s 401(k). This gets you the full employer match and could save you from the extra expense of setting up the solo 401(k).
The solo 401(k) deduction does not go on Schedule C and there fore doesn’t reduce your SE tax. Instead it goes on Schedule 1 line 28.
For only $500 a year contribution I don’t see a reason to bother with the solo 401(k).
If you’re trying to move your pre-tax IRA money into the solo 401(k) to enable back door Roth I’d first see if your employer’s plan will allow you to do a “reverse rollover”.
David Glenn, CPA | Glenn Advisory
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