Overall contribution max
Client is an attorney who makes over $500K per year from his law firm. He has a 401(k) plan tied to a profit sharing arrangement with the law firm. He has contributed about $55K to this 401(k)/profit sharing plan. He earned another $50,000 in a side one-off gig that is totally unrelated to his law firm’s business. He will receive a separate 1099 from that payer. The client is asking if he can contribute to a SEP/IRA based on 25% of the side $50K. I’m pretty sure he cannot as my understanding is there is an overall annual maximum to traditional retirement plan contributions. Roth is out too based on earnings. Is my thinking correct?
Mark
Permalink Submitted by Alan - IRA critic on Fri, 2018-05-25 20:20
Roth is out, but if he cannot do the SEP perhaps a back door Roth would work. As for the 55k limit, that applies per employer therefore his ownership share in the law firm is the key. Over 50% would result in only one 55k limit in total.