For single person businesses or freelancers the i401k (AKA a 'Solo 401k' or 'One Participant 401k') is worth a look at. It has higher limits than a SEP as the contribution structure is different.
-
i401k plus catchup contribution of $30k in 2023 for +50 year olds (the same rules as an employee 401k)
+
25% of what your own company paid you via payroll (typically if you’re an S-Corp) or use IRS publication 560 if don’t use a payroll for yourself.
The max for +50 year olds is 2023 is $73,500
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You can also have an IRA with an i401k, whereas with a SEP you can only do it using a loophole. You can then use that IRA contribution do a backdoor Roth.
This has the advantage of no matter how much you make in 1099 revenue you can put in the normal 401k max of $30k.
Schwab’s i401k is free and it behaves the same as an individual account, Vanguard’s is their mutual funds only.
It's an excellent alternative, Chris, one I should have mentioned along with the SEP-IRA. I'll get to the Solo 401(k) in a future article. Thank you for bringing it up. For readers interested in learning more about it now, here are two helpful links:
For single person businesses or freelancers the i401k (AKA a 'Solo 401k' or 'One Participant 401k') is worth a look at. It has higher limits than a SEP as the contribution structure is different.
-
i401k plus catchup contribution of $30k in 2023 for +50 year olds (the same rules as an employee 401k)
+
25% of what your own company paid you via payroll (typically if you’re an S-Corp) or use IRS publication 560 if don’t use a payroll for yourself.
The max for +50 year olds is 2023 is $73,500
-
You can also have an IRA with an i401k, whereas with a SEP you can only do it using a loophole. You can then use that IRA contribution do a backdoor Roth.
This has the advantage of no matter how much you make in 1099 revenue you can put in the normal 401k max of $30k.
Schwab’s i401k is free and it behaves the same as an individual account, Vanguard’s is their mutual funds only.
It's an excellent alternative, Chris, one I should have mentioned along with the SEP-IRA. I'll get to the Solo 401(k) in a future article. Thank you for bringing it up. For readers interested in learning more about it now, here are two helpful links:
IRS
https://www.irs.gov/retirement-plans/one-participant-401k-plans
Schwab
https://www.schwab.com/small-business-retirement-plans/individual-401k-plans
i401k’s don’t get the love and attention they deserve Jason!