Maxing Out My Solo 401k in Addition to Fortune 500 Company 401k Plan

The 401(k) regulations allow for contributions to multiple 401(k) plans. This is especially advantageous for those who have a full-time job and participate in that employer’s 401(k), and those who also have a self-employed business and participate in that self-employed business solo 401(k).

A solo 401(k) is made up of employee and employer contributions.

The employee contribution which for 2019 is $19,000 plus $6,000 for those age 50 or older is aggregated among all 401(k) plans.

However the profit-sharing contribution (employer contribution) is not subject to this aggregation rule.

As a result, if you have a solo 401(k) plan for your self-employed business and have already contributed the $19,000 plus $6,000 to the full-time employer 401k plan, you can still contribute the profit-sharing portion to the solo 401(k) plan even though you have already contributed the maximum of $62,000 (includes the catch up amount and employer profit sharing contribution)  to the daytime job 401k plan.

For example, let’s assume that your self-employed business is an S corporation and that you want to make a contribution to the solo 401(k). Let’s further assume that you have $100,000 of W-2 income from your S corporation.

Example & The Voluntary After-Tax Solo 401k Exception

Therefore, you would be able to contribute  a profit-sharing contribution (employer) amount of $25,000 into the solo 401(k) which was calculated by multiplying 100,000 × 25%. The end result, means that you would have contributed a total of $87,000 ($62,000 plus  $25,000) in aggregate to both your daytime job employer 401(k) and your self-employed business solo 401(k) plan. However, if you also want to make voluntary after-tax contributions , you could contribute the difference up to the $56,000 ceiling to your voluntary after-tax solo 401k account since this contribution type is not subject to the aggregation rules described above. VISIT HERE to learn more about this exception.

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 >>