I worked as a W-2 employee from Jan-Mar and became an independent contractor from Sep this year.My employer did not provide me 401(k) or any benefits. I received around 18K after tax from W2 and I'm expecting around 47K as independent contractor. I'm planning to invest in SEP IRA which would be 47k * 25% = 11K. Can I invest my W2 salary for retirement fund, if yes how and how much can I contribute.

Note: I'm new to this, so any help is appreciated.


Yes, you're able to have both. See this explanation for example.

Finally, if you have a 401(k) through an employer and have a SEP IRA for your self-employment income, each contribution is treated separately. You can defer up to $18,000 of your salary into your 401(k) and your total contribution is limited to $53,000 ($59,000 if over 50) after your employer contributes, as discussed earlier. Since your SEP IRA contributions are considered to come from the employer, none of it counts toward the $18,000 salary deferral limit, so you can contribute up to $53,000 or 25% of your earnings, whichever is less.

The amounts here are a bit old; 19k is now the max for your own contributions, and 56k is now the max for the employer contributions.

So in your case your limits are your total W2 income (up to 19k max) in your W2 employer's 401(k), and 25% of your contracting income, or $11,750, to the Solo 401(k) or SEP IRA (both of which use the 56k max).

  • The contribution limits in this article are a couple years old. Also be sure to differentiate between a W-2 employer 401(k) and a Solo 401(k). – Craig W Oct 25 '19 at 21:13
  • @CraigW Thanks for pointing that out, I've updated with the proper amounts. I think the article quote covers that, but I added some language to clarify. – Joe Oct 25 '19 at 21:18

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