Author Topic: Solo 401k and regular 401k  (Read 4500 times)

Abe

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Solo 401k and regular 401k
« on: February 17, 2014, 11:08:05 AM »
Hello all, I have a quick question. My wife has a new position where she will be self-employed and I want to set up a Solo 401k for her. Does my having a 401k, or a gross income >$200k affect this in any way? It just seems like too good a deal! Thanks.

foobar

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Re: Solo 401k and regular 401k
« Reply #1 on: February 17, 2014, 12:30:59 PM »
Nope. Solo 401(k)s are pretty sweet especially if have enough income to do a nice company match.

iamlindoro

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Re: Solo 401k and regular 401k
« Reply #2 on: February 17, 2014, 04:19:56 PM »
Hello all, I have a quick question. My wife has a new position where she will be self-employed and I want to set up a Solo 401k for her. Does my having a 401k, or a gross income >$200k affect this in any way? It just seems like too good a deal! Thanks.

One thing you might consider, depending on her level of income, is taking advantage of the fact that the spouse can participate in the Solo 401(k) to tax shelter even more money.  ie:

1) Contribute to your employer 401(k) to maximize match.
2) Wife maxes out employee portion of solo 401(k) for herself
3) Wife maxes out "employer match" on solo 401(k) for herself
4) Contribute the rest of your $17.5K max to your spousal solo 401(k)
5) Wife maxes out "employer match" on solo 401(k) for you (total tax shelter for you as a couple: $104K)

So basically you can shelter $104K of income between the two of you every year (as of 2014), plus still maximize your employer match on top of that ($104K + $x free dollars in your employer match per year).

Obviously this would require serious income on her part, but even if you can't hit the absolute maximums, you can still maximize what you can shelter, and if the income is there, you should definitely participate also.
« Last Edit: February 17, 2014, 04:21:31 PM by iamlindoro »

Abe

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Re: Solo 401k and regular 401k
« Reply #3 on: February 17, 2014, 04:32:45 PM »
That's amazing! Unfortunately, I think to contribute, I have to participate in her work and a term of my employment is no work on the side. In a few years, that will be feasible for me.

iamlindoro

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Re: Solo 401k and regular 401k
« Reply #4 on: February 17, 2014, 04:38:38 PM »
That's amazing! Unfortunately, I think to contribute, I have to participate in her work and a term of my employment is no work on the side. In a few years, that will be feasible for me.

While I'm all for integrity, how in the world would your employer know?  You don't need to work full time at your wife's business-- hell, do her books for a few hours on the weekend and have her give you some token salary.

beltim

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Re: Solo 401k and regular 401k
« Reply #5 on: February 17, 2014, 04:56:05 PM »
That's amazing! Unfortunately, I think to contribute, I have to participate in her work and a term of my employment is no work on the side. In a few years, that will be feasible for me.

While I'm all for integrity, how in the world would your employer know?  You don't need to work full time at your wife's business-- hell, do her books for a few hours on the weekend and have her give you some token salary.
How is that being all for integrity?

iamlindoro

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Re: Solo 401k and regular 401k
« Reply #6 on: February 17, 2014, 05:29:22 PM »
That's amazing! Unfortunately, I think to contribute, I have to participate in her work and a term of my employment is no work on the side. In a few years, that will be feasible for me.

While I'm all for integrity, how in the world would your employer know?  You don't need to work full time at your wife's business-- hell, do her books for a few hours on the weekend and have her give you some token salary.
How is that being all for integrity?

How about, because behaving contrary to this particular term of employment is not unethical?  He does no harm to his employer in any way by having a side hustle.  They can demand anything they want and, in an at-will employment state, they can fire him simply because they don't like the color of his shirt-- but it doesn't change the fact that if the business doesn't directly cannibalize the customers of the OPs employer, it's completely unreasonable of them to expect him to ignore all outside opportunities to make money.

If I worked for a religious employer and on of their BS terms of employment was that I not use birth control, I'd smile, cash my checks, and buy the family pack of condoms.  Ignoring an unreasonable request does not mean one is acting unethically.  Acting contrary to an unreasonable company policy does not make one immoral.

In what way does his helping his wife out with the books, or other token work done to further a family business, represent an ethical breach?
« Last Edit: February 17, 2014, 05:36:39 PM by iamlindoro »

beltim

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Re: Solo 401k and regular 401k
« Reply #7 on: February 17, 2014, 05:44:07 PM »
That's amazing! Unfortunately, I think to contribute, I have to participate in her work and a term of my employment is no work on the side. In a few years, that will be feasible for me.

While I'm all for integrity, how in the world would your employer know?  You don't need to work full time at your wife's business-- hell, do her books for a few hours on the weekend and have her give you some token salary.
How is that being all for integrity?

How about, because behaving contrary to this particular term of employment is not unethical?  He does no harm to his employer in any way by having a side hustle.  They can demand anything they want and, in an at-will employment state, they can fire him simply because they don't like the color of his shirt-- but it doesn't change the fact that if the business doesn't directly cannibalize the customers of the OPs employer, it's completely unreasonable of them to expect him to ignore all outside opportunities to make money.

If I worked for a religious employer and on of their BS terms of employment was that I not use birth control, I'd smile, cash my checks, and buy the family pack of condoms.  Ignoring an unreasonable request does not mean one is acting unethically.  Acting contrary to an unreasonble company policy does not make one immoral.

In what was does his helping his wife out with the books, or other token work done to further a family business, represent an ethical breach?

I'm making no statement on the ethics of the OPs contract.  I will say that in your response to me, you're making an ethical argument (basically, that it's ethical to breach an unethical part of a contract).  That's perfectly valid.  In your original response, though, you asked the OP how their employer would find out — in other words, you suggested that the ethics didn't matter.  It turns out you didn't mean that, but I'm sure you can see why I asked.

Sidebar: I've often wondered about the ethics of clauses like this in contracts.  If you're representing to an employer that you will not participate in any other work (which you are by virtue of a signature), how can it be ethical to lie?  On the other hand, is such a clause in the contract ethical itself?  And if it is, can that overcome your representation that you will abide by the terms of employment?  I think it's interesting stuff

iamlindoro

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Re: Solo 401k and regular 401k
« Reply #8 on: February 17, 2014, 05:50:23 PM »
I'm making no statement on the ethics of the OPs contract.  I will say that in your response to me, you're making an ethical argument (basically, that it's ethical to breach an unethical part of a contract).  That's perfectly valid.  In your original response, though, you asked the OP how their employer would find out — in other words, you suggested that the ethics didn't matter.  It turns out you didn't mean that, but I'm sure you can see why I asked.

Sure, that's reasonable.  I probably could have chosen my words better.  I think the clause being blanket is probably unreasonable assuming the spouse's work (or his involvement in it) doesn't detract from his employer's own bottom line (or compromise the quality of his work for them).

OP, our back in forth aside, if it's something you don't feel comfortable breaching, how about asking for an exception from your HR for an extremely limited scope of work for your wife?  (doing the books, taxes, or anything else you care to do that wouldn't be threatening and wouldn't compromise you, all in no more than a couple hours a week on weekends or something).  The worst they could say is no.

Mister Fancypants

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Re: Solo 401k and regular 401k
« Reply #9 on: February 20, 2014, 10:38:22 PM »
Most employers who have policies about employees not taking on additional jobs are in place to ensure that their employees are dedicating there time at work to their employer. In many cases these policies are in place in regulated industries like the securities and insurance industries where the companies are required by law to have polices to regulate their employees outside activities. These policies are in place to protect the employer’s interests. Some employers will include clauses that employees can have other jobs with approval from compliance departments or employees simply must notify the employer first, others will not include the clauses to simplify things for themselves in not having to manage those outside situations etc... Everything in these policies is for the benefit of the employer not the employee

Many times exceptions are granted for family related businesses compared to other outside opportunities, I would consult your employee handbook or HR representative.

Regardless of the ethical nature of the policy, you signed a policy, if you break it you are in breach no questions asked. If you are in breach your employer can take action up to termination. You can consult any lawyer on that one.  Is your > $200k job worth the risk?

-Mister FancyPants

Abe

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Re: Solo 401k and regular 401k
« Reply #10 on: February 21, 2014, 10:23:37 PM »
Here's another interesting twist - the practice she is joining still uses paper charts and I would like to develop an easy to use electronic medical record. The problem is that since I am an employee of a large university & hospital, my contract states it becomes their intellectual property!

I'm a risk-averse person, and figure the $17k + $51k is enough for retirement accounts for now. Now here's a question - if I have my own practice with a Solo 401k, and my wife still has hers, and we help each other out (but work in different fields so not the same business), would we be able to contribute to each others? If true, we could stash about a third of our income!

Mister Fancypants

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Re: Solo 401k and regular 401k
« Reply #11 on: February 22, 2014, 03:48:37 AM »
Here's another interesting twist - the practice she is joining still uses paper charts and I would like to develop an easy to use electronic medical record. The problem is that since I am an employee of a large university & hospital, my contract states it becomes their intellectual property!

Now you are providing more information and it sounds like you write software for a living (so do I).

The policy regarding your dedicated employment is to prevent from writing software for anyone else as while employed by the university anything you write is owned by them and they can and will lay claim to it.

Even if you write the software at home it has hard to prove you didn't do it on there time with their tools which gives them claim to it. Now the burden will be on you to prove otherwise, but even something as simple as using there MSDN paid for tools at home is enough to screw you.

The kicker is you become sue-able just for doing it but usually you just get fired if you spend too much work time doing other coding, the real problem is as soon as you make any money which is your goal that is when your employer will come after you and will be entitled to your profits.

Also then good luck sending your résumé out for other developer jobs after you get nailed double dipping.

Now the truth is almost every developer does this, side work and doesn't care just be careful it depends on related it is to what you are doing some companies are very protective of intellectual property others care far less when it is completely unrelated..

Abe

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Re: Solo 401k and regular 401k
« Reply #12 on: February 23, 2014, 08:49:53 AM »
Thanks for the advice!  That's what it looks like happens if I make anything will working for the university. Will just have to wait until I'm done with training.