Self Employed Retirement

[lifeisshort123]

So...

I have a full time job and contribute to a 403b and max it out to the federal limit on a pretax basis.

But, I also work on the side a bit.  Earn probably about $5k-7k a year on top of that.

Am I able to put that money into a separate pre-tax retirement vehicle? I don't need that income to live off at the moment...

If so, what is the right one to open?

[MDM]

Where do you stand relative to the suggestions in https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 ?

[lifeisshort123]

We have maxed out all tax advantaged accounts we are aware of, and are also fully funding Roth IRA… Trying to figure out if there is a way to shelter more money from taxes.

[MDM]

The Individual 401(k) — a.k.a. Solo 401(k) or Self-Employed 401(k) might apply. 

Careful, though, if you are each using the backdoor Roth process for the two Roth IRAs, because SEP and SIMPLE IRAs interfere with that.

[sonofsven]

The Solo 401k has the advantage of a higher contribution limit than the SEP IRA, plus you can open a Roth Solo 401k, although not all brokerages offer the Roth component.
At $5-$7 k you won't really be able to take full advantage of the higher limit.
An SEP IRA is slightly easier to set up.
You can have both.

[seattlecyclone]

The Solo 401k has the advantage of a higher contribution limit than the SEP IRA, plus you can open a Roth Solo 401k, although not all brokerages offer the Roth component.

These advantages only come into play when you don't have another job where you're already able to max out your employee-side elective deferral limit.

Given that the OP is currently maxing out their 403(b) they'd only be able to make employer-side contributions to their self-employed retirement account, and the limits for those are generally the same whether it's a 401(k) or SEP IRA.

SEP is simpler to set up and close down than the solo 401(k). Perhaps start there? You'd be able to contribute about $1,000 to that based on the side gig earnings you report. As mentioned above it does constrain your ability to do backdoor Roth contributions, but this downside is mitigated if you're willing to do a taxable conversion of your relatively small SEP balance.

[terran]

Another thing to note that's specific to the 403(b)/solo 401(k) combo (as opposed to the 401(k)/solo 401(k) combo where this doesn't apply) is is that not only is the salary deferral limit combined as it is with all workplace plans, but the overall limit (around $66k as of 2024 I think?) is also combined. This is because of some obscure law that considers both 403(b) and solo 401(k) to be under control of the individual. This probably isn't a problem unless you have some combination of very high income at your job and/or business, very good employer match, or you make mega-backdoor Roth contributions through your 403(b) or solo 401(k) such that you contribute up to the overall limit across both plans.

[mistymoney]

So...

I have a full time job and contribute to a 403b and max it out to the federal limit on a pretax basis.

But, I also work on the side a bit.  Earn probably about $5k-7k a year on top of that.

Am I able to put that money into a separate pre-tax retirement vehicle? I don't need that income to live off at the moment...

If so, what is the right one to open?

I applied for an LLC and contribute the max I can to a sep-ira off the side income. I think it is 20%? up to the maximums across all retirement savings which is I think 66k or something?

Light on details as I am not close to the maxes there.