457 & SEP contributions

Submitted by Michael Eastham on Mon, 2017-05-22 20:56

My client works for the state of FL and is maxing out contributions to the 457. He is starting to do some side work as a Schedule C/ unincorporated sole proprietor. He wants to contribute to a retirement plan through this new business. Can he set up a SEP IRA and contribute to this in addition to the 457 he has at work? If so, is there a point where he would not be able to contribute based on a phase out or something like that?
Thanks



Submitted by Alan - IRA critic on Tue, 2017-05-23 00:08

The contribution limit for 457 plans and SEP IRAs are entirely separate. One has no effect on the other.

Submitted by William Tuttle on Tue, 2017-05-23 01:08

  • 457 plan contributions have their own contribution space. They do not interfere with either employee deferrals or employer contributions to any self-employed retirement plans.
  • A one-participant 401k plan allows an employee deferral up to $18K ($24K if age >= 50) in addition to the 20% employer contribution you could make to a SEP IRA.
  • The net result is that your client can make greater retirement plan contributions with a lower net self-employment income with a one-participant 401k plan than with a SEP IRA.

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