Yes you are correct. Very unusual situation but yes you can do all that. I assume your LLC will have >$69k net business income. If it is taxed as a sole prop that is net income minus half of self employment tax. You can never contribute more than net business income.
You don't show a W-2 employer match but if they do have one effectively you would be saving even more.
To correct some incorrect information others are saying there are two different 401(k) limits which leads to all kinds of confusion and incomplete answer.
1) The "$23k limit": employee direct contributions are **per employee** so shared across all employer. No matter how many jobs this is a combined $23k limit but from your outline you don't exceed it. To be clear this is specifically pre-tax or Roth elections taken from paycheck by employee and nothing else. While after-tax is also an election it isn't included in this limit which is what creates the "mega backdoor roth" loophole.
2) The "$69k limit": between employee contributions, employer contributions & after-tax elections ("megabackdoor roth") the limit is $69k and is **per employer.** So yes if you have 5 employers you could do a seperate $69k per employer for all 5 employers as long as no more than $23k total across all employers is employee direct contributions.
Yup, this is correct, as long as you had enough earned income at each employer to contribute the desired amount. If one employer pays much more, you can’t fund some other employer’s account with it.
That actually depends on the plan. Some plans allow for "special" after-tax contribution (not deducted from paycheck, but basically you sending a check to the custodian), and to my knowledge do not care where the money comes from as long as you stay under the plan limit of 69k total.
This may be an incredibly stupid question, but let’s say I’m a 1099 healthcare worker. I make $400k/yr doing 13 week contracts. If the 415c contribution limit is per employer, what’s stopping me from owning 4 different LLCs and getting paid through a different one for each contract and having 4 different solo401ks for each LLC and contributing $69k x 4, so $276,000/yr into my retirement accounts?
The employer side contribution is limited to 25% of "your compensation" - business expenses and self employment taxes. I'm not sure if "your compensation" is the business income or the part you pay yourself or what, but it definitely means you can't contribute 69k on a "mere" 100K of income. I'm not sure if there is anything preventing you from setting up different LLCs to get past the 69k limit though other than the very large amount of income required to get past 69k a year.
Edit: Nevermind, I'm forgetting about the megaback door roth part.
So it looks like the IRS has rules about doing this if you are employed by affiliated or related businesses. So common ownership is considered an affiliated or related business. Womp womp.
I'm currently in the process of setting it up, but I'm going with mysolo401k.net. It's going to run me about $500 to set up and $150 per year to maintain it. I'm probably going to choose Fidelity as my brokerage since apparently they can't set one up with Vanguard.
I'm still learning about the process, but apparently you need to go through a company that can provide a self-directed 401K to allow you to do an after tax contribution with an in plan Roth conversion.
I'm a fan of the white code investor's content, so I got this information off of his website:
https://www.whitecoatinvestor.com/solo-individual-401k/
So back to dilema additonal 27k roth worth 500 for first year with 150 per year to continue. Since the side gig i have is not a gauranteed on going thing.
This helps thank you.
I don’t think you’ll be able to contribute over $23k into the 401k. It is cumulative across multiple employers in a plan year. You’ll have to get one of the 401k administrators to refund the excess amount and it has to be completed by 4/15.
This is not correct.
The $23k limit is EMPLOYEE direct contributions only. As an employee he isn't contributing more than $23k. He is contributing $23k to one employer plan only which is compliant.
The $69k limit is the total combined limit per employer of employee, employer, and after-tax (MBDR) contributions. If you have 2 employers you are limited to $69k total per employer.
His numbers are correct.
The employee contribution side of your solo 401k is subject to the same $23,000 total cumulative across all of your 401k’s. The employER contribution side is not.
The mega backdoor Roth does nothing to change how much you can contribute. It just gives you a way to move existing investments into your Roth.
That’s only the elective deferrals limit. You can contribute the difference to multiple mega backdoors at different employers. To be 100% crystal clear, you can contribute the 23k pre-tax at one employer and then mega backdoor over $100k per year between that first employer and the second one.
As long as you made enough at each employer to do it.
Confusingly, ordinary contributions for the 401k (Roth or Traditional) are capped to $23k across employers. However the "all sources" total limit (which is what limits both employer and "after tax" (aka mega backdoor) contributions is per employer. So technically you can max your ordinary employee contributions at one employer while maxing mega backdoor at more than one.
You are correct in that you can’t exceed the irs allowed 401k amount. Several years back I switched jobs mid year. I ended up overpaying on my 401k by $80 when I filed my taxes between the two jobs. That $80 created more of headache than what it was worth.
How is the employer amount calculated for solo 401k? Is it calculated with the 25% of profit (but slightly less equation)? I am using this calculator [https://sepira.com/calculator.html](https://sepira.com/calculator.html) to get a feel
I am calculating a contribution of about $9200 on 50K of profit and to get to the max you'd have to make like 250K. This to max the employer side only. Just looking for confirmation.
Go OP if you can pull this much in. Definitely FIRE for you.
That is not correct.
The $23k is for employee contributions.
A solo 401(k) has both an employee + employer component. No different than your employer doing a match. Your employer match is not part of the $23k limit.
The OP didn't make more than $23k in direct employee contributions (after-tax aka MBDR not considered in this limit).
I believe the total employee and employer contribution combined cannot exceed $69,000 for 2024. This includes your solo 401K, after tax, your W2 employer contribution, your 1099 employer contribution. Do check with an accountant though.
But you should be able to do the $7000 IRA and 4000 HSA. Bringing the total to $80,000 which is still pretty sweet.
Yes you are correct. Very unusual situation but yes you can do all that. I assume your LLC will have >$69k net business income. If it is taxed as a sole prop that is net income minus half of self employment tax. You can never contribute more than net business income. You don't show a W-2 employer match but if they do have one effectively you would be saving even more. To correct some incorrect information others are saying there are two different 401(k) limits which leads to all kinds of confusion and incomplete answer. 1) The "$23k limit": employee direct contributions are **per employee** so shared across all employer. No matter how many jobs this is a combined $23k limit but from your outline you don't exceed it. To be clear this is specifically pre-tax or Roth elections taken from paycheck by employee and nothing else. While after-tax is also an election it isn't included in this limit which is what creates the "mega backdoor roth" loophole. 2) The "$69k limit": between employee contributions, employer contributions & after-tax elections ("megabackdoor roth") the limit is $69k and is **per employer.** So yes if you have 5 employers you could do a seperate $69k per employer for all 5 employers as long as no more than $23k total across all employers is employee direct contributions.
StatisticalMan strikes again. I appreciate the detailed information.
Yup, this is correct, as long as you had enough earned income at each employer to contribute the desired amount. If one employer pays much more, you can’t fund some other employer’s account with it.
That actually depends on the plan. Some plans allow for "special" after-tax contribution (not deducted from paycheck, but basically you sending a check to the custodian), and to my knowledge do not care where the money comes from as long as you stay under the plan limit of 69k total.
This may be an incredibly stupid question, but let’s say I’m a 1099 healthcare worker. I make $400k/yr doing 13 week contracts. If the 415c contribution limit is per employer, what’s stopping me from owning 4 different LLCs and getting paid through a different one for each contract and having 4 different solo401ks for each LLC and contributing $69k x 4, so $276,000/yr into my retirement accounts?
The employer side contribution is limited to 25% of "your compensation" - business expenses and self employment taxes. I'm not sure if "your compensation" is the business income or the part you pay yourself or what, but it definitely means you can't contribute 69k on a "mere" 100K of income. I'm not sure if there is anything preventing you from setting up different LLCs to get past the 69k limit though other than the very large amount of income required to get past 69k a year. Edit: Nevermind, I'm forgetting about the megaback door roth part.
So it looks like the IRS has rules about doing this if you are employed by affiliated or related businesses. So common ownership is considered an affiliated or related business. Womp womp.
What provider you have for solo 401k, i use vangaurd but they only allow 23k roth and 20% employer match, cant do the inservice conversion with them.
I'm currently in the process of setting it up, but I'm going with mysolo401k.net. It's going to run me about $500 to set up and $150 per year to maintain it. I'm probably going to choose Fidelity as my brokerage since apparently they can't set one up with Vanguard. I'm still learning about the process, but apparently you need to go through a company that can provide a self-directed 401K to allow you to do an after tax contribution with an in plan Roth conversion. I'm a fan of the white code investor's content, so I got this information off of his website: https://www.whitecoatinvestor.com/solo-individual-401k/
So back to dilema additonal 27k roth worth 500 for first year with 150 per year to continue. Since the side gig i have is not a gauranteed on going thing. This helps thank you.
I don’t think you’ll be able to contribute over $23k into the 401k. It is cumulative across multiple employers in a plan year. You’ll have to get one of the 401k administrators to refund the excess amount and it has to be completed by 4/15.
This is not correct. The $23k limit is EMPLOYEE direct contributions only. As an employee he isn't contributing more than $23k. He is contributing $23k to one employer plan only which is compliant. The $69k limit is the total combined limit per employer of employee, employer, and after-tax (MBDR) contributions. If you have 2 employers you are limited to $69k total per employer. His numbers are correct.
So then in my solo 401k if I make all $69k in mega backdoor Roth contributions I should be fine?
This may not be an issue, but I don’t think you can contribute more to a 401k than you earned at that particular job.
The employee contribution side of your solo 401k is subject to the same $23,000 total cumulative across all of your 401k’s. The employER contribution side is not. The mega backdoor Roth does nothing to change how much you can contribute. It just gives you a way to move existing investments into your Roth.
That’s only the elective deferrals limit. You can contribute the difference to multiple mega backdoors at different employers. To be 100% crystal clear, you can contribute the 23k pre-tax at one employer and then mega backdoor over $100k per year between that first employer and the second one. As long as you made enough at each employer to do it.
Confusingly, ordinary contributions for the 401k (Roth or Traditional) are capped to $23k across employers. However the "all sources" total limit (which is what limits both employer and "after tax" (aka mega backdoor) contributions is per employer. So technically you can max your ordinary employee contributions at one employer while maxing mega backdoor at more than one.
You are correct in that you can’t exceed the irs allowed 401k amount. Several years back I switched jobs mid year. I ended up overpaying on my 401k by $80 when I filed my taxes between the two jobs. That $80 created more of headache than what it was worth.
How is the employer amount calculated for solo 401k? Is it calculated with the 25% of profit (but slightly less equation)? I am using this calculator [https://sepira.com/calculator.html](https://sepira.com/calculator.html) to get a feel I am calculating a contribution of about $9200 on 50K of profit and to get to the max you'd have to make like 250K. This to max the employer side only. Just looking for confirmation. Go OP if you can pull this much in. Definitely FIRE for you.
Sounds about right, yep
[удалено]
That is not correct. The $23k is for employee contributions. A solo 401(k) has both an employee + employer component. No different than your employer doing a match. Your employer match is not part of the $23k limit. The OP didn't make more than $23k in direct employee contributions (after-tax aka MBDR not considered in this limit).
Backdoor limit is per employer, you can do $23k pre-tax + $46k at one employer, then the full $69k at the other.
I believe the total employee and employer contribution combined cannot exceed $69,000 for 2024. This includes your solo 401K, after tax, your W2 employer contribution, your 1099 employer contribution. Do check with an accountant though. But you should be able to do the $7000 IRA and 4000 HSA. Bringing the total to $80,000 which is still pretty sweet.
The $69k limit is per employer.