401k and SEP

Submitted by Geoffrey Kasher on Wed, 2024-11-20 11:54

The 70-year-old client wants to retire in January 2025. He wants to max out his 401k plan that month and then separate from the company.

He will then be a contractor,1099. to the same company. Income will be paid to his LLC.

Can he also contribute to a SEP that his LLC sets up?

Or is there a cap since he maxed out his 401k

TIA

Permalink Submitted by Alan - IRA critic on Wed, 2024-11-20 14:48

There is no cap unless he owns more than a minor interest in the 401k sponsored employer.

Permalink Submitted by Geoffrey Kasher on Wed, 2024-11-20 16:38

he has no owner ship in the current employer. so he can max out both.. just want to be clear

Permalink Submitted by Alan - IRA critic on Wed, 2024-11-20 19:04

yes, both.

Permalink Submitted by Geoffrey Kasher on Thu, 2024-11-21 09:00

company could max out for spouse if she were an ee of the LLC as well. correct?

Permalink Submitted by Geoffrey Kasher on Thu, 2024-11-21 09:02

if wife is ee of the LLC, the corp can contribute the max as well for her. correct?

Permalink Submitted by Geoffrey Kasher on Thu, 2024-11-21 09:03

If wife is ee of the LLC, the corp could max out for her as well, correct?

Permalink Submitted by Alan - IRA critic on Thu, 2024-11-21 12:53

Yes, if she is eligible per Article 1 of the 5305 SEP. And if she is eligible a contribution must be made to her SEP IRA.