Question about where to put my money

[r3d3mption]

If this isn't the right place, sorry!

I currently work for my state government, where i contribute to a pension plan and a 457b plan.

Aside from that, I also have a traditional IRA (where I rolled 401k money into after changing from a previous employer), a roth IRA which I currently max out, and a taxable account, all with betterment. Lastly, I started a small business on the side this year, dog training, and have actually done pretty well there so I'm looking at a SEP IRA as well.

I can't play with the pension, the amount is set and participation is required. But for the other accounts, how would you split up the money?

457b
Roth IRA
Trad IRA
Taxable Account
SEP IRA

I can find guides that talk about what dollar amounts to put in different combinations of buckets, but not one with all of them.

I know the contribution limit for the 457 is separate from the contribution for the IRA/401k but is SEP IRA included in the 18k limit for the IRA/401K or a third separate limit in and of itself?

I've got about 22k of my net pay to put into investments (50% of my net pay), and that excludes all money from the side business which is just sitting in a checking account right now.

Help?

[DaveR]

Look into an individual 401k (solo 401k) for the side business instead of a SEP IRA. That gives you 18k in the 457, 18k in the 401k, and 5500 in the IRAs.

With the individual 401k, your dog walking business can company match your contribution and you can even pay in profit shares. Total limit is $53k.

So 457, 401k, and IRA can get you to $76k.

Money goes first into tax-advantaged accounts (thanks Uncle Sam). Which one depends on the fees on the investments available. If you have low cost index funds (e.g. Vanguard) in the 457, that works. If not, the 401k can have those as an option (hey, your the employer setting up the plan, so get to make the decisions).

Individual 401ks are not zero-cost, but the high limits and the control of options make them pretty attractive.

[r3d3mption]

DaveR, for the 401k matching, is that still the case if it's a sole proprietorship LLC? Not a corporation so I'm taxed as an individual, passthrough. But what you're saying is that I could put in money and have the "company" put in money, and that company money would be considered an expense, reducing the taxable self-employment income?

[Rosy]

@rd3m - I can't help you with your question, but there is a subforum here called "Ask a Mustachian" or the "Investors ..." which would expose you to more readers and therefore more answers.

[DaveR]

DaveR, for the 401k matching, is that still the case if it's a sole proprietorship LLC? Not a corporation so I'm taxed as an individual, passthrough. But what you're saying is that I could put in money and have the "company" put in money, and that company money would be considered an expense, reducing the taxable self-employment income?

Exactly.

Sole proprietor (single member) LLC can choose tax status. If you are set up as a disregarded entity, business income/expenses pass through to your individual return via Schedule C. A properly set up solo 401k is a qualified retirement plan, so company matches are indeed valid business expenses. And with one person, you can match 25% of salary.

Example: put in your $18k limit, pay yourself a $72k salary, company matches your $18k (100% match) for a total of $36k in retirement contributions. These are all pre-tax expenses, so your taxable income isn't $72k, it's $36k for income tax purposes. Self-employment tax (FICA) is based on the $72k however so you'll not get around that. And this example means your LLC is doing around $100k. The numbers work on a smaller scale, too.

Your accountant/tax adviser should be able to take you through the scenarios. This type of set up (usually with S-corps) and salary/expense/tax management is pretty common...to the extent that the IRS appently likes to sniff around more than usual. So get some professional advice before jumping in. But done right, it will save you thousands every year.