Can I Adopt a Solo 401k Plan if I have an Existing Full Time Job?

Contribute to solo 401k and full-time employer 401k

Full time job with a side business 401k options | Adopt multiple 401k Plans

It’s not well known that you can participate in multiple 401k plans. For instance, if you have a side business in addition to a full time job, you can adopt a Solo 401k for your side business while still continuing to make contributions to your full time job 401k.

However, before you proceed to Open Solo 401k for your side business, make sure you first qualify by meeting the following eligibility requirements:

  •     The presence of self-employment activity.
  •     The absence of full-time employees.

So if your side business generates self-employment income, has no full time employees (note that part-time employees are okay as long as they work less than 1,000 hours per year) besides you and your spouse and are looking to maximize your annual 401k contributions, a Solo 401k may be a good fit. Solo 401k can be adopted by any entity type such as a Corporation, LLC, Partnership or Sole Proprietorship.

Should you decide to proceed in adopting a Solo 401k plan for your side business, while at the same time continuing to make contributions to your full time job 401k, and have confirmed that you meet the above requirements, you next need  to familiarize yourself with the annual 401k contribution limits.

For example, the maximum amount that you can contribute for the 2022 plan year to all 401ks combined is $61,000, plus an additional $6,500 if you are age 50 or older. Therefore, let’s say that you contribute $10,000 of pretax salary deferral contributions to your full-time employer’s 401k, but would like to also max out the $61,000 allowable contribution for 2022 based on net income generated from your side business. To accomplish this, you would open a Solo 401k and make a $51,000 contribution.

Lastly, since the Solo 401k is for your side business, you have complete control over its assets, which means that you can invest it in alternative investments such as real estate, precious metals and private company shares. You can also gain access to your Solo 401k funds tax free by taking a loan from it (Solo 401k Loan) and may use the funds for any purpose including investing the proceeds in your side business. However, the key to these last two items depends on the Solo 401k Provider that you open your Solo 401k with. You see not all Solo 401k providers Solo 401k plan’s  document’s allow for investing in alternative investments or will administer a Solo 401k Loan.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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