How My401k Works
You have a full-time job that covers your health care and your 401(k). You also get to earn side-income without dealing with the “Self-Employment tax.” Congratulations – you’re earning more and may have a backup plan if you leave your company.
Still, all that side-income is being taxed. At your company, you at least have a 401(k). However, that’s not stopping you from setting up another retirement fund for your side-income.
Even if you have a 401(k) at your company, you can have a separate 401(k) just for your side income. And better yet, you have more control, to invest in a wider range of funds, and avoid the unnecessary fees in your company’s 401(k).
Even better – if you make enough money full-time, you can save a lot more than the standard $19,000 + some matching you get at your full-time job. With an individual 401(k), the first $56,000 you earn ($62,000 if over 50) can all be saved into your 401(k).
In fact, if you’re married, your business may be able to save you $110,000-122,000 for retirement between the two of you.
What My401k Does
You can go to Vanguard, Fidelity, or TD Ameritrade today to establish an individual 401k for free. They will let you contribute $19,00 of your self-employment income, plus an additional 20% of that income, up to $36,000 this year.
To maximize the possible contribution through these sites, you’ll need to earn well over $160,000 in self-employment income (more considering deductions and pass-through income). And if married and contributing to two 401k plans, you’d have to earn well over $320,000 to maximize what you can save.
However, if you’re not earning those amounts, there’s a trick to save more: the “Mega Backdoor 401k“.
– You can fully contribute the first $56,000-$124,000 of your side income.
– You’ll need to set up a self-directed 401k.
That second part is tricky. Setting up such a 401k can be expensive and time-consuming. Many lose over 40 hours getting caught in paperwork, as it’s easy to make mistakes in the process.
My401k removes the hassle, making this all possible in minutes, not days. By answering a few questions, we’ll have a CPA set up your self-directed plan. We’ll then automate the challenging steps to register with a brokerage and begin contributing your 401k.
All of this is possible, at a price comparable to related services.
Ready to learn more? Contact us
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