Originally Posted by spncity
I have a couple of part-time businesses that can wildly fluctuate from year to year.
I understand how one can contribute more than the standard individual max through the Solo 401k (individual contribution plus catch up plus a contribution from the business of 25% of profit up to $49,000).
But on the off years - when the business profit is way down - am I limited to the profit (salary)? Or can I go into the red to still add the businesses' contribution of 25% of profit?
Say the profit is $20,000. Individual contribution and partial catch-up would take up the $20,000. Can I still add $5,000 from the company?
I want the answer to be "yes". But I think the answer is "no".
Got to that section of the book, unfortunately the answer seems to be no. It says total contributions to your 401k "cannot exceed the lesser of your compensation (earned income) or $40,000," so you wouldn't be able to go over the $20,000 in your example.