Hi there,
I'm self employed running a small business (LLC), with zero common law employees--the only people who work for us do sporadic work and are 10-99'ed. I'm getting an account that will allow me to contribute to a Roth 401K, as as well as a regular 401K within the I401K. My questions are about the maximums, and the maximums per the income I earn. I know the overall maximum is 53k (feel free to correct me if thats wrong). My original thought was that i wanted to put all 53K into the Roth...but I have since been advised that at my age (24), the Max I could place into the Roth portion of the I401k is $18,000. If I did the $18,000, this would leave a sizable chunk of tax advantaged space available to me by using the regular 401k portion...however I've been advised that only a (25%) portion of my overall earnings can be placed into to the 401k portion.
To keep things simple, lets us a nice round number and say that with my LLC I make 100k per year. Does this mean I could contribute 18k to the Roth, 25k to the regular 401k (25% of the 100k), and then I've utilized the maximum amount of tax advantaged space in this plan (43K)?? Or is that completely incorrect, and I could put 53k into the roth portion if I wanted/more into the regular 401k portion, etc. All I feel like I'm certain on is that 53k is the firm maximum, but everything else I have gotten mixed answers on. I'm hoping someone familiar with these type of plans can confirm this and provide a concrete answer. Any helpful responses are greatly appreciated--thank you in advance for giving this a look.
I401K Contribution Maximums
- Earl Lemongrab
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Re: I401K Contribution Maximums
Employer contributions must be to pre-tax, not Roth. That's just the way it works because it's a tax-deduction on that side of the business.
Earl
Earl
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Re: I401K Contribution Maximums
Earl,
I believe Roth is definitely an option per this link from Vanguards site https://investor.vanguard.com/what-we-o ... idual-401k. Unless I'm reading it wrong I think I should be allowed to contribute 18k to Roth portion of the I401k?
I believe Roth is definitely an option per this link from Vanguards site https://investor.vanguard.com/what-we-o ... idual-401k. Unless I'm reading it wrong I think I should be allowed to contribute 18k to Roth portion of the I401k?
- Earl Lemongrab
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- Joined: Tue Jun 10, 2014 1:14 am
Re: I401K Contribution Maximums
I said employER. The 18k is employEE. You can put that much in Roth, but not 53k.
Earl
Earl
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Re: I401K Contribution Maximums
First let us get some basic information
How is your LLC set up for tax purposes? Is it S Corp or are you doing as Sole Proprietor.
My experience is in S Corp. If S Corp gets 100k and has insurance and other expenses of say 10k and runs a yearly salary of 60K, then 18 of that 60k goes in as EmployEE portion - Roth or Trad.
For 60k salary, employer can then pay 25% of 60 = 15K as EmployER contributions and they can go in as traditional only.
What is left off (100k-10k-60K-15K- employer share of payroll taxes of 60K) will then be given as K1 to employee.
How is your LLC set up for tax purposes? Is it S Corp or are you doing as Sole Proprietor.
My experience is in S Corp. If S Corp gets 100k and has insurance and other expenses of say 10k and runs a yearly salary of 60K, then 18 of that 60k goes in as EmployEE portion - Roth or Trad.
For 60k salary, employer can then pay 25% of 60 = 15K as EmployER contributions and they can go in as traditional only.
What is left off (100k-10k-60K-15K- employer share of payroll taxes of 60K) will then be given as K1 to employee.
Re: I401K Contribution Maximums
If this is your only employment income, you can use Vanguard's calculator to figure out the maximum:SpartanBull wrote:To keep things simple, lets us a nice round number and say that with my LLC I make 100k per year. Does this mean I could contribute 18k to the Roth, 25k to the regular 401k (25% of the 100k), and then I've utilized the maximum amount of tax advantaged space in this plan (43K)??
https://personal.vanguard.com/us/SbsCal ... Controller
If you also have another job, it's more complicated.
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