Solo 401(k) and IRA
An individual has a solo 401(k). 1099 income is $30,000 and is his only earned income. He defers $23,000 (he is over age 50) for 2013. Is he able to contribute $6,500 to an IRA for him and $6,500 for his wife to IRAs for 2013? Do you look at the $30,000 as earned income or do you look at the $7,000 of income after the 401(k) contributions to determine the earned income?
Permalink Submitted by Alan - IRA critic on Thu, 2014-01-23 21:38
His net earnings from SE must be reduced by his 401k contribution and by his SE tax deduction. If he had a Roth option in the soloK he could direct enough of his 23k to the Roth to leave 13k of remaining income for the Roth IRA including spousal.