Assume I have a day job that has a 401(k) with no matching and I am also self-employed. I'm considering structuring my side business as an S corp and setting up a solo 401(k) in addition to the 401(k) from my day job. I'm interested in putting the absolute maximum away in a tax-deferred manner, but I'm confused by contribution limits. It is not the case, but for this discussion, assume my income from each source is large enough not to be a limiting factor.
1) I understand that there's a maximum of $18,000 of elective contributions across all 401(k) plans, so my S corp wouldn't help that, but it seems like the employer contributions for an S corp are not limited except by the $53,000 limit for elective plus employer contributions. My question is whether this limit sums across plans or not. In other words, which of these is the best I can do?
- A. $18,000 (elective) at my day job and then $35,000 (employer) at my S-corp
- B. $18,000 (elective) at my day job and then $53,000 (employer) at my S-corp
2) I am also considering employing my wife at the S-corp. In principle, could I contribute my $18K at work, then set aside $53K for myself through the S-corp and $53K for her (so the total is $124K)?
3) There is some mention of sole proprietorship and LLC's not being able to contribute an amount that is more than 25% of an employee's compensation. But for regular employers, the limitation is 100% of compensation. I can't seem to tell which limitation would apply to an S corp I would create that would then employ me (and perhaps my wife). Would I be limited to 25% of my compensation?
So no one mentions it, I am also aware of the option to contribute $11,000 to a traditional IRA (non-deductible at my income level) and then rolling into a Roth. But that action doesn't seem to interact with any of my 401(k) stuff.