So I filled out the paperwork this weekend to start a solo 401(k) for my writing business. As usual, Vanguard was awesome with phone assistance. I'm reviewing the huge ass plan paperwork but my biggest question was when can I rollover the 401(k) to a trad IRA, and they said I can dissolve the 401(k) plan at any time, but that I couldn't start one for another year. I like the idea of being able to dissolve the plan when I want without having to end my writing business.
1) My biggest question now is, what does it look like during the year? I have to mail in payments to Vanguard, but I can check balances, etc., online. Do I just mail in whatever money I want to mail in, whenever I want, just making sure that the total contributions don't ultimately exceed my total compensation?
2) And what exactly is "total compensation?" Since I'm a solo, is that gross revenue, net revenue after expenses, or what?
Example 1: So let's say I earn $20,000.00 writing in 2018, and my deductible expenses are $4,000.00. Can I contribute $18,500, or just $16,000 to the solo 401(k)?
The example under Section 1 of this Forbes article lets the guy take the full employee-side contribution (which makes since given the $100K income example, but it also seems to imply that on the employer side allowing 20% or 25% contribution, that contribution is based on W2 wages, so gross revenue, but I wanted to see if others could confirm.
https://www.forbes.com/sites/greatspeculations/2015/12/03/business-owners-may-be-better-off-with-solo-401k-than-sep-ira/#3dca04b271d0Example 2: And let's say I have a huge year and earn $40,000 writing W2 income, with $6,000 in expenses. So I could contribute $18,500 on the employee side and then another $8,000 on the employer side (20% of gross revenue of $40,000)?