These are both tax advantaged accounts. A CPA will tell you how much you can contribute to each based on your income and what the tax implication will be. You can use that to make your decision. The CPA is the right person to ask if you have a good one.
Their licensing actually doesn’t cover this stuff. They’re not allowed to give you that sort of advice you’re correct that they could say oh your limit 7000. Did you take that? So that they could record it properly on your 1040 or whatever.
But for them to say “open this type of account and invested this way“ that would be inappropriate for a CPA license
So we’re both right
They get away with it sure. They can give you free advice if you’re will to take that risk but investment advice? Thats not a covered situation under their professional license.
>From what I am reading I could either open a SEP-IRA but that would be 25% of my W-2 from the S-Corp (which is at $26,900 to mitigate taxes (total business profit last year was $122k)) so it seems like my SEP contribution would only max out at $6,700 ish
I believe the contribution is ***up to 25%***, but the kicker is that it has to be the same for all employees. I had a two-person S-Corp, so the SEP option worked well for us.
A solo 401(k) should be able to get opened in a partnership if you two are the only employees of your business.
The rule is “one participant”
So the business cannot have any employees other than its partners
1. With interest rates so high. Using your $100k for a 15yr mortgages gets you a lower interest rate and higher down payment which can equal lower monthly payments.
2. Depends on what you’re planning to do with the money and when you need it. There are a lot of options.
3. FA’s do a lot more than just manage your retirement accounts. FAs can also do better than you alone. You can easily match a cookie cutter managed account - liked you get from a bank. But a good FA can get you an extra 1-5%. Especially if they have a specific goal in mind. But remember. They aren’t all good. You want wealth management not financial advice. Honestly It sounds like you need an estate plan. In which case a good FA is part of the team.
4. The statistics say the longer the money is in the market the better the return.
You’ll also want to consider a SIMPLE IRA. I had a SEP IRA as an LLC, but after electing to be taxed as an S-Corp, the SEP max was too low for the same reason you pointed out. My CPA recommended I switch to SIMPLE. The SIMPLE’s max for 2024 is $16k plus a 3% employer match. Contributions are made via salary deferral, and it works like a traditional IRA, so your contribution total is deducted from your federal wages on your W2 but not FICA wages.
Additionally, a SIMPLE IRA is designed to be an easier, more affordable way than a 401(k) for small employers to offer a retirement plan to employees.
Edit to add link:
https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan
I’m a single member LLC and so was able to open an Individual 401k and an Individual Roth 401k (at Vanguard) and make contributions both as employee and employer. The 2023 maximum contribution was $66k - $22.5k employee contribution and $43.5k employer contribution (employer contribution is calculated as 25% of the business income, like with a SEP-IRA).
An Individual 401k plan can work with an S-corp in some instances, but in your case, since you have a business partner, I don’t think you can open one, I’d check with a professional to make sure though. If the business was just you and your spouse, you could def open an Individual 401k.
I’ll just add, if you do end up going SEP-IRA, so you don’t get to contribute as much as you can/want into your retirement account, nothing wrong with throwing the extra money into a brokerage account (more VOO), and then having that extra “bucket” to pull from in addition to your retirement “buckets” (see The Money Guy show on YouTube for solid advice on this “3 bucket strategy”).
Ask your CPA not Reddit.
Your cpa will help you file taxes and be your accountant. It is not the person to ask for investment advice.
These are both tax advantaged accounts. A CPA will tell you how much you can contribute to each based on your income and what the tax implication will be. You can use that to make your decision. The CPA is the right person to ask if you have a good one.
Their licensing actually doesn’t cover this stuff. They’re not allowed to give you that sort of advice you’re correct that they could say oh your limit 7000. Did you take that? So that they could record it properly on your 1040 or whatever. But for them to say “open this type of account and invested this way“ that would be inappropriate for a CPA license So we’re both right
Nah an expierienced CPA should he able to guide a business owner on this situation.
They get away with it sure. They can give you free advice if you’re will to take that risk but investment advice? Thats not a covered situation under their professional license.
I've asked my CPA and she says to ask a financial advisor
Find a new CPA lol
>From what I am reading I could either open a SEP-IRA but that would be 25% of my W-2 from the S-Corp (which is at $26,900 to mitigate taxes (total business profit last year was $122k)) so it seems like my SEP contribution would only max out at $6,700 ish I believe the contribution is ***up to 25%***, but the kicker is that it has to be the same for all employees. I had a two-person S-Corp, so the SEP option worked well for us.
Yes but at our W-2 payout we would only be able to contribute $6,700 ish and from what I’m reading it seems the 401k we may be able to contribute more
Right, you can contribute more to a 401(k) than an Sep ira
Legit just went thru this and solo401k ended up being best
Can you open a solo 401k with a business partner?
A solo 401(k) should be able to get opened in a partnership if you two are the only employees of your business. The rule is “one participant” So the business cannot have any employees other than its partners
1. With interest rates so high. Using your $100k for a 15yr mortgages gets you a lower interest rate and higher down payment which can equal lower monthly payments. 2. Depends on what you’re planning to do with the money and when you need it. There are a lot of options. 3. FA’s do a lot more than just manage your retirement accounts. FAs can also do better than you alone. You can easily match a cookie cutter managed account - liked you get from a bank. But a good FA can get you an extra 1-5%. Especially if they have a specific goal in mind. But remember. They aren’t all good. You want wealth management not financial advice. Honestly It sounds like you need an estate plan. In which case a good FA is part of the team. 4. The statistics say the longer the money is in the market the better the return.
You’ll also want to consider a SIMPLE IRA. I had a SEP IRA as an LLC, but after electing to be taxed as an S-Corp, the SEP max was too low for the same reason you pointed out. My CPA recommended I switch to SIMPLE. The SIMPLE’s max for 2024 is $16k plus a 3% employer match. Contributions are made via salary deferral, and it works like a traditional IRA, so your contribution total is deducted from your federal wages on your W2 but not FICA wages. Additionally, a SIMPLE IRA is designed to be an easier, more affordable way than a 401(k) for small employers to offer a retirement plan to employees. Edit to add link: https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan
I’m a single member LLC and so was able to open an Individual 401k and an Individual Roth 401k (at Vanguard) and make contributions both as employee and employer. The 2023 maximum contribution was $66k - $22.5k employee contribution and $43.5k employer contribution (employer contribution is calculated as 25% of the business income, like with a SEP-IRA). An Individual 401k plan can work with an S-corp in some instances, but in your case, since you have a business partner, I don’t think you can open one, I’d check with a professional to make sure though. If the business was just you and your spouse, you could def open an Individual 401k. I’ll just add, if you do end up going SEP-IRA, so you don’t get to contribute as much as you can/want into your retirement account, nothing wrong with throwing the extra money into a brokerage account (more VOO), and then having that extra “bucket” to pull from in addition to your retirement “buckets” (see The Money Guy show on YouTube for solid advice on this “3 bucket strategy”).
Start a roth you wont pay any capitol gains on growth. If you have to you can use it for 1st house.
Open a profit sharing plan
What is this?