Spousal IRA and Self-Employed Retirement

[ontheheel]

Situation: I work full-time and contribute max to my TSP and IRA. My wife is a SAHM, but earns a (very) small amount from teaching at our homeschool co-op (1099 employee).

Goal: I want to maximize tax-advantaged accounts for my family.

Question: I know that I can max an IRA in her name, but can I also open a SEP/401(k)/SIMPLE in her name? If I'm already maxing an IRA, what would the contribution limits be for the self-employed plan? Are there any other options to maximize tax-deferred savings in single-earner households?

Also: We have an LLC for our rental property set up as a pass-through entity. What are our options for moving income from there to a tax-advantaged plan?

Thanks for the help!

[BeardedMustache]

Question: I know that I can max an IRA in her name, but can I also open a SEP/401(k)/SIMPLE in her name? If I'm already maxing an IRA, what would the contribution limits be for the self-employed plan? Are there any other options to maximize tax-deferred savings in single-earner households?]

Spousal IRA is probably all you can do in this case. However, you may consider posting this question in the Taxes forum for more creative solutions.

[MDM]

Are there any other options to maximize tax-deferred savings in single-earner households?

If you have a single-earner situation, you are doing what is likely best.

If you spouse's income increases, see Solo 401(k) plan - Bogleheads for maximization ideas.

[dandarc]

How much is a "very small" amount?

IRAs and workplace retirement are separate limits - the IRA won't reduce what she can put into a SEP, SIMPLE, or SoloK.  Since she is a 1099, she could do any of those 3 options.  If a SIMPLE eats up all her business income, go that route - it is slightly less complex than an individual 401K.  If there is enough income that you need the higher limits, a solo 401K will typically have the highest limits at low incomes.  SEP-IRA will likely have the lowest limit of the 3 - 20% of (schedule C less 1/2 self employment tax).

[ontheheel]

This is really helpful, thanks yall.

Really small means ~$1,500-2,000/year. We don't even include it in our budget, so we don't count on it at all. Looks like that probably wouldn't qualify her for a SIMPLE IRA, but would work with a solo 401(k). Looking at the Vanguard solo, I don't see any minimums for opening an account, and the only account fee I see is $20/year per fund, which would be just fine with only one fund.

Am I missing anything? Looks like a fairly easy way to stash her earnings without much startup hassle other than a phone call.

This wouldn't add up to a ton over the years, but it would keep our tax bill down by $200-300/year as long as we funneled all of it to the solo account.

[dandarc]

SIMPLE IRA is the way to go - you can defer taxes on basically all $1500-2000 of her side business income in addition to the IRA you're already doing.