SIMPLE IRA & Solo 401k
Posted: Mon Apr 12, 2021 8:21 am
For many years I have both been an employee of a non-profit (which is owned by no one) and had my own consulting business as a self-employed sole proprietor.
In 2020 the non-profit offered a SIMPLE IRA in which I participated. I contributed $1,500 and the organization matched that amount.
Regarding retirement plan contribution limits....being over 50 years old I am eligible for the $6,500 catch up on top of the $19,500 available to all, which is a total of $26,000.
Several years ago I learned that for my own business I had to chose either the SIMPLE IRA or the Solo 401k but not both. At that point I switched from the SIMPLE IRA to the Solo 401k because it allowed me greater contributions.
However, that seems to only apply to plans through the same employer. It seems that one can participate in a SIMPLE IRA with one employer and also in a Solo 401k with a separate, unrelated employer.
For example purposes let's say I earned $50,000 in my consulting business.
I've done the calculations about five different ways and it seems that based upon that $50,000 I can contribute a total of $33,000. The first $26,000 can be any combination of traditional deductible and Roth non-deductible contributions. However, the remaining $9,000 is considered my employer contribution and can only be a deductible non-Roth contribution.
Finally, it seems that my $1,500 participation as an employee of the non-profit uses up $1,500 of my annually allowed $26,000, therefore leaving $24,500 to be contributed from my self-employment income but leaving the $9,000 employer contribution amount intact.
Though I am an accountant I am not the type of accountant that most people think of when they hear the word accountant.
The bulk of my career has been being the accounting / financial person for an organization and not preparing other peoples' tax returns. For the last eight years the only tax returns I have been preparing are my own and one other person's (whose return is much simpler than mine).
I try to learn as much as I can about any tax issue that affects me and generally ignore the ones that have no applicability to me.
This is one that I've never prior encountered for myself and anyone else.
I'm putting this all here in the off-chance that one of you has at some time been in a similar position.
At this point I'm fairly confident of the above. But I'm the type of person who will seek many confirmations and do several calculations different ways to make sure I'm always getting the same answers.
Thanks
In 2020 the non-profit offered a SIMPLE IRA in which I participated. I contributed $1,500 and the organization matched that amount.
Regarding retirement plan contribution limits....being over 50 years old I am eligible for the $6,500 catch up on top of the $19,500 available to all, which is a total of $26,000.
Several years ago I learned that for my own business I had to chose either the SIMPLE IRA or the Solo 401k but not both. At that point I switched from the SIMPLE IRA to the Solo 401k because it allowed me greater contributions.
However, that seems to only apply to plans through the same employer. It seems that one can participate in a SIMPLE IRA with one employer and also in a Solo 401k with a separate, unrelated employer.
For example purposes let's say I earned $50,000 in my consulting business.
I've done the calculations about five different ways and it seems that based upon that $50,000 I can contribute a total of $33,000. The first $26,000 can be any combination of traditional deductible and Roth non-deductible contributions. However, the remaining $9,000 is considered my employer contribution and can only be a deductible non-Roth contribution.
Finally, it seems that my $1,500 participation as an employee of the non-profit uses up $1,500 of my annually allowed $26,000, therefore leaving $24,500 to be contributed from my self-employment income but leaving the $9,000 employer contribution amount intact.
Though I am an accountant I am not the type of accountant that most people think of when they hear the word accountant.
The bulk of my career has been being the accounting / financial person for an organization and not preparing other peoples' tax returns. For the last eight years the only tax returns I have been preparing are my own and one other person's (whose return is much simpler than mine).
I try to learn as much as I can about any tax issue that affects me and generally ignore the ones that have no applicability to me.
This is one that I've never prior encountered for myself and anyone else.
I'm putting this all here in the off-chance that one of you has at some time been in a similar position.
At this point I'm fairly confident of the above. But I'm the type of person who will seek many confirmations and do several calculations different ways to make sure I'm always getting the same answers.
Thanks