I401K Contribution Maximums

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
SpartanBull
Posts: 131
Joined: Fri Jun 06, 2014 12:31 am

I401K Contribution Maximums

Post by SpartanBull »

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.
User avatar
Earl Lemongrab
Posts: 7270
Joined: Tue Jun 10, 2014 1:14 am

Re: I401K Contribution Maximums

Post by Earl Lemongrab »

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
Topic Author
SpartanBull
Posts: 131
Joined: Fri Jun 06, 2014 12:31 am

Re: I401K Contribution Maximums

Post by SpartanBull »

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?
User avatar
Earl Lemongrab
Posts: 7270
Joined: Tue Jun 10, 2014 1:14 am

Re: I401K Contribution Maximums

Post by Earl Lemongrab »

I said employER. The 18k is employEE. You can put that much in Roth, but not 53k.

Earl
niceguy7376
Posts: 3007
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: I401K Contribution Maximums

Post by niceguy7376 »

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.
User avatar
tfb
Posts: 8397
Joined: Mon Feb 19, 2007 4:46 pm

Re: I401K Contribution Maximums

Post by tfb »

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)??
If this is your only employment income, you can use Vanguard's calculator to figure out the maximum:

https://personal.vanguard.com/us/SbsCal ... Controller

If you also have another job, it's more complicated.
Harry Sit has left the forums.
Post Reply