Author Topic: Solo 401k question  (Read 850 times)

RhythmKats

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Solo 401k question
« on: January 17, 2017, 07:46:41 PM »
I decided to open up a solo 401k since I regularly have some 1099 income. For 2016, I had about $3k in freelance income. Am I correct in thinking I can contribute the entirety of this amount to my solo 401k? I do not have an employer sponsored 401k or 403b, so this is my only investment vehicle in this particular "category."

Thanks!

Heroes821

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Re: Solo 401k question
« Reply #1 on: January 18, 2017, 07:29:33 AM »
You can contribute up to the limit of $18,000 between all 401k type accounts per year.  With a solo 401k you can "match" yourself from your business up to 25% of business profits. Assuming your other retirement account contributions are below $15000 from other work, you should be able to contribute that no issue.

If you only made 3k for the year, I would make sure you have a roth option in your solo 401k as well.

RhythmKats

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Re: Solo 401k question
« Reply #2 on: January 18, 2017, 07:38:37 AM »
Thanks for your response. I'm aware of the match on the employer side as well. That's why I was confused. I know there is a specific formula to determine net profit and therefore the contribution on the employER side. It was just unclear to me if an employee (sole proprietor) could contribute their total income (up to $18k).

Will look into Roth option.

Heroes821

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Re: Solo 401k question
« Reply #3 on: January 18, 2017, 01:49:08 PM »
You can contribute the entire income, you CANNOT contribute the entire income as your own employer.  Only 25% of profits upto the limit of ~53k minus the personal ~18k per year. As long as you don't exceed the 25%. So $750 of 3000 could be employer contributed and then the rest could be put in yourself.

RhythmKats

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Re: Solo 401k question
« Reply #4 on: January 18, 2017, 01:57:31 PM »
Thanks! That's the clarification I needed.