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Solo Roth 401k question
Old 07-17-2007, 01:53 AM   #1
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Solo Roth 401k question

I just found out about the solo 401k and there is something I don't understand.

If you are self employed but you have many sources of income what are your contribution limits for your solo 401k?

Here is what I mean. Lets say your main business makes 20k a year and you make 5k a year in interest and 10k a year trading stocks and another 5k a year doing odd jobs for people giving you 40k a year total income.

Can you only contribute to your 401k from just your business that makes 20k a year or can you include your other income sources as well and count it as 40k?

The business that makes 20k a year is really your only real business the rest of your income is still self employed income but it isn't an actual business.

I haven't been able to find the answer to this anywhere but I figured it would be just your business amount of 20k that would count. If so is there another way that you could set up a roth retirement account that you could use your full 40k income with?

I probably made a mess out of explaining this!



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Old 07-17-2007, 05:56 AM   #2
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Originally Posted by summer2007 View Post
I just found out about the solo 401k and there is something I don't understand...Can you only contribute to your 401k from just your business that makes 20k a year or can you include your other income sources as well...
Just your business income is used for the calculation.

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Old 07-17-2007, 09:49 AM   #3
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I think if your are a schedule C business you can put as much as 20% of the income subject to the self employment tax in your 401k. to a maximum of about $45k this year.
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Old 07-18-2007, 12:12 PM   #4
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Actually, looking at Schwab's "individual 401k", it looks to me
like you can contribute the first $15,000 of Schedule C income

Now, this is only a regular 401K, not Roth 401K, but as someone
pointed out in another thread, you can use the headroom in AGI
(generated by deferring to this individual 401K) to do a Roth
conversion. So, if I'm reading this correctly, you can effectively
put all the deferred money into your Roth ! Seems almost too
good to be true ...
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