Author Topic: 1099 contractor. Best options for retirement account?  (Read 728 times)

davisgang90

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1099 contractor. Best options for retirement account?
« on: January 08, 2022, 08:37:29 AM »
Hi all,

I'm potentially looking at becoming a 1099 contractor for about $22K a year. I've got a Roth IRA, Trad IRA and a 401K (actually TSP) already.

I know there are lots of vehicles out there, but I'm trying to figure out which one allows me to put the most that money into a retirement fund. I am able to fund my Roth IRA each year separately.

Appreciate any insights from those who've worked this kind of position before.

sonofsven

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Re: 1099 contractor. Best options for retirement account?
« Reply #1 on: January 08, 2022, 09:00:56 AM »
Look into the roth solo 401k, I think it gives you the most space.

terran

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Re: 1099 contractor. Best options for retirement account?
« Reply #2 on: January 08, 2022, 11:08:08 AM »
If you're already maxing out the TSP then a SEP IRA and a solo 401(k) will have the same contribution limit (if not then the solo 401(k) will have a higher limit at lower self employed income). The SEP will mess up backdoor Roth IRA contributions if that's a concern to you. The solo 401(k) will be a problem if you ever have employees, has an extra annual tax form to file once it reaches $250k, and with the right plan will allow rollovers, so you can get rid of a traditional IRA to allow a backdoor Roth (again, if that applies to you).

davisgang90

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Re: 1099 contractor. Best options for retirement account?
« Reply #3 on: January 08, 2022, 11:23:05 AM »
If you're already maxing out the TSP then a SEP IRA and a solo 401(k) will have the same contribution limit (if not then the solo 401(k) will have a higher limit at lower self employed income). The SEP will mess up backdoor Roth IRA contributions if that's a concern to you. The solo 401(k) will be a problem if you ever have employees, has an extra annual tax form to file once it reaches $250k, and with the right plan will allow rollovers, so you can get rid of a traditional IRA to allow a backdoor Roth (again, if that applies to you).

Thanks for the replies. I'm retired military, so no longer contributing to the TSP or the Trad IRA, just the Roth. Sounds like the Solo 401K may be the best option.

dandarc

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Re: 1099 contractor. Best options for retirement account?
« Reply #4 on: January 08, 2022, 11:44:31 AM »
Yeah - soloK if you're not contributing elsewhere. You can defer basically all of that money if you want to. Math is somewhat complicated at lower incomes - might want to read up how to withdraw excess contributions with your broker in case you find out that you've gone over when you do your taxes.

sonofsven

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Re: 1099 contractor. Best options for retirement account?
« Reply #5 on: January 08, 2022, 12:46:03 PM »
The solo 401K is available as a roth, the SEP is not, if that makes a difference.

SwordGuy

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Re: 1099 contractor. Best options for retirement account?
« Reply #6 on: January 08, 2022, 01:43:39 PM »
I hope that's not a full time job income.   That's pretty low.

Is this your only income or do you have a military pension?  If so, how much?   Spouse with income too?   It makes a difference whether folks recommend a roth 401K or a regular 401K.   

How much are you planning on saving each year?   It makes a difference as to whether we would recommend an IRA or 401K, as the fees will likely be lower on an IRA.

terran

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Re: 1099 contractor. Best options for retirement account?
« Reply #7 on: January 08, 2022, 04:17:10 PM »
In that case yes, the solo 401(k) will let you contribute the most. Consider making Roth solo 401(k) contributions and traditional IRA contributions rather than the reverse if you want reduce your taxable income. This is because traditional solo 401(k) contributions reduce your Qualified Business Income which means they reduce the QBI deduction, while Roth solo 401(k) doesn't. This means that you effectively get only 80% of the tax savings you would normally expect to from a traditional retirement account contribution.

davisgang90

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Re: 1099 contractor. Best options for retirement account?
« Reply #8 on: January 09, 2022, 04:14:40 AM »
I hope that's not a full time job income.   That's pretty low.

Is this your only income or do you have a military pension?  If so, how much?   Spouse with income too?   It makes a difference whether folks recommend a roth 401K or a regular 401K.   

How much are you planning on saving each year?   It makes a difference as to whether we would recommend an IRA or 401K, as the fees will likely be lower on an IRA.

I probably should have been more clear. I have a sizable military pension, VA disability and a good size retirement nest egg that I don't need to touch.

This $22K is for a few hours a week online teaching. I'm just looking for the best vehicle to increase my retirement accounts, preferably Roth. I'm not sure how much I'll have left after paying all the taxes, but I'd like to save the majority of it.

Thanks again for all who have commented.