1

I was wondering if anyone could tell me if I qualify to set up a personal 401-k Plan? I am currently employed and make a full salary. I have maxed out my individual contribution in my personal IRA account at $5500 this year.

I also receive income as an independent contractor both from my current employer with a 1099-Misc for work that I do above and beyond my regular employment contract and also as compensation for new clients that I bring into the firm. I also get paid directly from some clients. I have my own private business account and personal EIN number for the contractor work.

My employer doesn't offer any 401-K or pension plan and I feel I'm behind in the retirement game. I would really like to start using some of the money I'm earning as an independent contractor (no employees) to save in a personal 401-K. Am I eligible? I can't get a straight answer from anyone on this. I believe that I am.

Thank you in advance.

Improve this question
4
  • It is my understanding that if you are a W2 employee with a company other than your own, you are not eligible for a self 401k. You should probably look at using a taxable brokerage account instead for additional retirement savings. – EkoostikMartin Dec 10 '14 at 19:22
  • It's my understanding that he's both a W2 employee and an independent contractor. Being the former doesn't prevent him from being the latter. – David Rice Dec 10 '14 at 20:41
  • David is correct. I am both a W2 employee and an independent contractor. I understand that the W2 income cannot be used for a personal 401K but I believe that I can use the independent contractor money? J – Derek Dec 10 '14 at 21:33
  • @Derek that's correct – Andrew Walters Dec 11 '14 at 13:26
1

I'm not a tax lawyer, but from what I can tell it looks like you'd be eligible to use your contractor income to fund a Solo 401(k). http://www.irafinancialgroup.com/whatissolo401k.php "To access these benefits an investor must meet two eligibility requirements:

  1. The presence of self employment activity.

  2. The absence of full-time employees."

And from the IRS itself (http://www.irs.gov/pub/irs-tege/forum08_401k.pdf)

Improve this answer

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.