Solo 401k and IRA Same Year Contribution

Submitted by Huseyin Yildirimturk on Thu, 2019-05-30 13:14

I have an Individual (Solo) 401K at TD Ameritrade I setup for my S-corp;
1. Can I contribute same time/year to my Solo 401k at TD Ameritrade and IRA at Vanguard.
2. What will be the contribution limits?
3. Will the be any tax defer disadvantages for doing so?
thanks



Submitted by William Tuttle on Thu, 2019-05-30 14:18

  1. Any one-participant 401k contributions will make you an “active participant” in an employer retirement plan. This will subject you to traditional IRA MAGI deduction income limits.
  2. The standard one-participant 401k contribution limits will apply.
  1. There is an income phase out range of the traditional IRA deduction. Your deduction can go from the full IRA contribution limit down to $0.
  2. To the degree you can not deduct traditional IRA contributions, you may be able to make direct Roth IRA contribution. However, direct Roth IRA contributions are also subject to a much higher Roth MAGI income limit, which is also subject to a phaseot from the IRA contribution limit. Your contribution can go from the full IRA contribution limit down to $0.
  3. To the degree you can not make roth IRA contributions, you can make non-deductible tradtional IRA contributions and do Roth conversions. The so-called Backdoor Roth.
  • There will be no direct tax deferral disadvantages if you are able to make deductible traditional IRA contributions. However, if/when you need to do Backdoor Roths, you will not want any pre-tax IRA balances in any traditional, SEP and SIMPLE IRA accounts. If these exist, you will want to make sure your one-participant 401k plan accepts IRA rollovers (not Vanguard).
  • I suggest you do some basic research yourself. Traditional IRA deduction MAGI income limits and Roth contribution MAGI income limits are available from the IRS and a multitude of financial web sites. Detailed descriptions of the Backdoor Roth process is also available from a multitude of financial websites.

    • Submitted by Huseyin Yildirimturk on Fri, 2019-05-31 23:00

    Thanks for your reply. I will understand better if I have some sample case numbers;- Case; tax filing joint, s-corp w-2 $60k, s-corp pass tru $60k, no income from wife.If I want to contribute to both solo 401k at TD Ameritrade and IRA at Vanguard (vanguard IRA being maximum),  What will be the contribution limits for both?  thanks again.  

    Submitted by William Tuttle on Sat, 2019-06-01 00:29

    As I already said, you should be able to research and find this easily yourself. In fact it would have taken you less time than posting your response.

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