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Learning, Sharing, and Teaching => Taxes => Topic started by: PFHC on October 16, 2015, 01:00:03 AM

Title: GET A JOB!!! But, I already have one!
Post by: PFHC on October 16, 2015, 01:00:03 AM
Get another!

Here's my deal:

Maxing out 401k, my wife's IRA, and my IRA. No option for HSA.

I have about $5000/month that I need something to do with. I have a plan up until early 2018. It's this:
When that's all finished, I still have $5k/month I'd like to put somewhere that doesn't get annihilated by taxes. My work allows me 6 months of the year off (read my post about being a merchant mariner). In my time off, I could start a business doing odd jobs. Idea behind this was that I could then contribute to a SIMPLE/SEP IRA. The way I read it is that if I made at least $12k, I could max it out. Is this true? Can I open a SIMPLE/SEP IRA if I'm already employed by a company that offers a 401k? If not me, could we do it in my wife's name?
Title: Re: GET A JOB!!! But, I already have one!
Post by: terran on October 16, 2015, 06:56:45 AM
A SEP maxes out at $53k. You can put 20-25% of self employed earnings in (depending on business structure) so you need to make something like $265k to truly max it out.

There's also nothing wrong with investing in a taxable account. They can be quite tax efficient. See https://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement for tips.
Title: Re: GET A JOB!!! But, I already have one!
Post by: Fishindude on October 16, 2015, 07:02:57 AM
Great idea.
Many other benefits to having your own business also.
Title: Re: GET A JOB!!! But, I already have one!
Post by: MDM on October 16, 2015, 11:53:58 AM
Can I open a SIMPLE/SEP IRA if I'm already employed by a company that offers a 401k
Googling that phrase returned http://www.doughroller.net/retirement-planning/sep-ira-for-the-part-time-self-employed-who-also-contribute-to-a-401k/ as the first result. :)
Title: Re: GET A JOB!!! But, I already have one!
Post by: PFHC on October 16, 2015, 06:09:28 PM
A SEP maxes out at $53k. You can put 20-25% of self employed earnings in (depending on business structure) so you need to make something like $265k to truly max it out.

There's also nothing wrong with investing in a taxable account. They can be quite tax efficient. See https://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement for tips.
Thanks for this link. Great stuff.
Title: Re: GET A JOB!!! But, I already have one!
Post by: PFHC on October 16, 2015, 06:39:22 PM
Can I open a SIMPLE/SEP IRA if I'm already employed by a company that offers a 401k
Googling that phrase returned http://www.doughroller.net/retirement-planning/sep-ira-for-the-part-time-self-employed-who-also-contribute-to-a-401k/ as the first result. :)
Nice! Amazing how Google do that! This is exactly what I was looking for. :)
Title: Re: GET A JOB!!! But, I already have one!
Post by: PFHC on October 16, 2015, 06:42:16 PM
Great idea.
Many other benefits to having your own business also.
Thanks. Looks it may work, too!
Title: Re: GET A JOB!!! But, I already have one!
Post by: SwordGuy on October 16, 2015, 07:39:21 PM
You could hunt for rental properties while at sea (or your spouse could do so) if you have internet connections available.  When you get ashore you could check them out, pick one, and fix it up before you head back out to sea.  $5k/ month would buy a nice rental property in my area for cash, including necessary repairs and an $10k dammit fund per property.
Title: Re: GET A JOB!!! But, I already have one!
Post by: _Nico_ on October 16, 2015, 08:22:45 PM
One thing to note: I'm fairly certain you can only contribute funds to your SEP IRA that were made FROM your self employed work. Meaning any money from your merchant marine job doesn't qualify. Unless you do something like fund your side business with your extra money from your merchant marine job and pay yourself via that...but that's a big grey area and I'm not sure how legal that especially when it comes to using it for tax deferred accounts.
Title: Re: GET A JOB!!! But, I already have one!
Post by: PFHC on October 16, 2015, 08:49:05 PM
You could hunt for rental properties while at sea (or your spouse could do so) if you have internet connections available.  When you get ashore you could check them out, pick one, and fix it up before you head back out to sea.  $5k/ month would buy a nice rental property in my area for cash, including necessary repairs and an $10k dammit fund per property.
I have tossed this around a bunch. Just not sure I want to hassle with tenants when I'm out here...
Title: Re: GET A JOB!!! But, I already have one!
Post by: PFHC on October 16, 2015, 08:50:01 PM
One thing to note: I'm fairly certain you can only contribute funds to your SEP IRA that were made FROM your self employed work. Meaning any money from your merchant marine job doesn't qualify. Unless you do something like fund your side business with your extra money from your merchant marine job and pay yourself via that...but that's a big grey area and I'm not sure how legal that especially when it comes to using it for tax deferred accounts.
Ya, I was worried about this. The idea smacked of something fishy, that's why I posted it here.
Title: Re: GET A JOB!!! But, I already have one!
Post by: terran on October 16, 2015, 09:15:28 PM
One thing to note: I'm fairly certain you can only contribute funds to your SEP IRA that were made FROM your self employed work. Meaning any money from your merchant marine job doesn't qualify. Unless you do something like fund your side business with your extra money from your merchant marine job and pay yourself via that...but that's a big grey area and I'm not sure how legal that especially when it comes to using it for tax deferred accounts.
Ya, I was worried about this. The idea smacked of something fishy, that's why I posted it here.

Yeah, it's going to have to be income that shows up on schedule C. I don't think money you have invested in a business would qualify.
Title: Re: GET A JOB!!! But, I already have one!
Post by: JZinCO on October 19, 2015, 11:04:25 PM
One thing to note: I'm fairly certain you can only contribute funds to your SEP IRA that were made FROM your self employed work. Meaning any money from your merchant marine job doesn't qualify. Unless you do something like fund your side business with your extra money from your merchant marine job and pay yourself via that...but that's a big grey area and I'm not sure how legal that especially when it comes to using it for tax deferred accounts.

Correct me if I'm wrong, but even if one is being fradulent, it's more or less zero sum. Let's say you earn $17.5K with the day job. You could report $17.5K in earnings on schedule C, then take an above the line deduction of $ 17.5K for a solo 401K contribution. On your 1040, it would appear you made 17.5K more, so you still end up paying taxes on that original 17.5K from the day job.
Essentially for any deduction for self employment retirement contributions, the money needs to originate independent of the day job.
edit: it's actually a loss because you would have to pay FICA taxes on the 17.5K... i think..