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Solo 401K with a Solo Roth 401K and MEGA Backdoor Roth
In 2020, I have worked as both a sole proprietor / individual contractor with no employees and as a W2 part-time employee. I am 41 yrs old (under 50) and will have multiple streams of income in 2020:
- $100K from 1099 contract work as a sole proprietor / individual contractor (from Jan 1-Apr 31)
- $60K from a W2 as a part-time employee (projected through the entire year from Jan 1-Dec 31)
- $85K in taxable short-term gains from stocks, dividends, and other investment income (projected through the entire year from Jan 1-Dec 31)
- Projected Total Income for 2020: $245K from all income streams
I currently have 4 retirement accounts open:
- a Solo (Individual) 401K (new account, balance: $0)
- a Solo (Individual) Roth 401K (new account, balance: $0)
- a Traditional IRA (existing account, balance: $280,000 of which $40,000 is in gains in 2020)
- a Roth IRA (existing account, balance: $118,000 of which $18,000 is in gains in 2020)
I would like to maximize my tax deductions this year and move as much money as possible into both after-tax and tax-deferred accounts.
My question includes:
- Can I contribute up to a max of $57K (employee + employer portion) to my Solo (Individual) 401K AND a separate amount to my Solo (Individual) Roth 401K ? Is the max contribution limit of $57k total across BOTH the solo 401K and solo Roth 401K? Otherwise, what is the contribution limit on the Roth 401K?
- Can I either:
- (Ideally) Contribute up to a max of $57K (employee + employer portion) to my Solo (Individual) 401K AND an additional $37,500 to a Mega Backdoor Roth? Or...
- Contribute up to a max of $57K (employee + employer portion) to my Solo (Individual) 401K AND an additional $6,000 to a "regular" Roth? Or...
- Contribute up to a max of $57K (employee + employer portion) to my Solo (Individual) 401K AND an additional $6,000 to a Traditional IRA?
What can and can't i do? My goal is to deduct / defer the maximum amount possible.
Note: I tried to do my research before asking this question. Here are some of the links I read:
- https://ttlc.intuit.com/community/other-financial-discussions/discussion/solo-401k-and-mega-backdoor...
- https://www.nerdwallet.com/article/investing/what-is-a-solo-401k
- https://www.nerdwallet.com/blog/investing/mega-backdoor-roths-work/
- https://www.irs.gov/publications/p590a (I did not read the entire thing and got lost in the middle)
- https://www.kiplinger.com/article/retirement/t001-c000-s001-how-much-can-you-contribute-to-a-solo-40...
- https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sha...
Thanks for any help with this.
Topics:
‎October 10, 2020
3:02 PM