I just had a possibly-brilliant idea, but I am completely not an expert in retirement/tax laws, so I'm wondering if there's anything I'm missing here:

I have a regular job I plan on keeping long-term; it makes enough money that I feel comfortable maxing out my 401k, which is great. I also max out my IRA (Roth, though for the sake of this, I'm not sure that's relevant), and I'd love to contribute more tax-sheltered beyond that, which until now, I believed was just not possible.

However, I also have a significantly smaller income stream from a side-hobby - but big enough that I would totally get in trouble if I were to fail to report it (on the order of a couple thousand dollars a year or so.) I just realized - as far as I can tell, the only requirement to being able to open a Solo 401k (Roth or otherwise) is that you make reportable income from something that is not from a job that provides a 401k - and that you can then have your "employer" (i.e. yourself) contribute extra? Can I actually contribute my full contribution to a work 401k, but then have my side hobby "contribute" into a Solo 401k via "employer" "matching" of a few hundred a year extra (as it looks like you're limited to 20% of what you earn?) Granted, that's not a huge amount of money, but it's not nothing, either. (And would mean if that side income ever grew larger, I could start "matching" more money, too, if that's actually how it works.) Even better, presumably that would mean I could also contribute the full amount I made via the side-hustle as well, if I reduced my contribution from my work 401k commensurately, for more direct control over how it was invested? That'd be great, too.

Am I missing anything that would make that not work?

2 Answers 2


Your total salary deferral cannot exceed $18K (as of 2016). You can split it between your different jobs as you want, to maximize the matching.

You can contribute non-elective contribution on top of that, which means that your self-proprietorship will commit to paying you that portion regardless of your deferral. That would be on top of the $18K. You cannot contribute more than 20% of your earnings, though. So if you earn $2K, you can add $400 on top of the $18K limit (ignoring the SE tax for a second here).

Keep in mind that if you ever have employees, the non-elective contribution will apply to them as well.

Also, the total contribution limit from all sources (deferral, matching, non-elective) cannot exceed $53K (for 2016).

  • Thanks! That is awesome that it actually works like that! So just to be clear, I can contribute (just to keep it simple) 17k from my job, 1k from my side job, and another 400 (or whatever is 20% of the full amount I made at that side job that year). Presumably if I only made 2k at that side-job, I couldn't contribute 2k + 20%, though - I assume both salary deferral + contribution together have to be no greater than the amount my "company" (which is really just a personal hobby that's making me some money, so I definitely don't have to worry about employees) makes that year? Still great.
    – neminem
    Aug 24, 2016 at 12:46
  • And yes, I do see, as you said, you can't actually ignore the SE tax - looks like you just have to pay that first regardless, and then remove that amount from the amount you're considered to have earned for purposes of how much you can contribute?
    – neminem
    Aug 24, 2016 at 12:48
  • @neminem That's my understanding
    – littleadv
    Aug 24, 2016 at 15:35
  • "Your total salary deferral cannot exceed $18K" If the employer allows after-tax Traditional 401k contributions, however, that can far exceed $18K.
    – user102008
    Aug 26, 2016 at 19:30
  • @user102008 but that's not a deferral, it is after tax
    – littleadv
    Aug 27, 2016 at 4:32

Poster forgot to mention his age (range). If you're aged 50 or more, you are allowed a catch-up of $6000 in addition to the $18000 max deferral amount to your 401k (2015-2017)

IRS Retirement Topics - Catch-Up Contributions

  • 2
    A reference to the IRS website mentioning this would be even better, as numbers like this have a tendency to change over time. Oct 25, 2017 at 19:23
  • 3
    @MrMojo - Edit your answer to include the link instead of posting a comment.
    – airfishey
    Oct 25, 2017 at 21:07
  • While admirable that you heeded the advice and included the link, it was meant to be included in your answer, not in the comments. So edit your answer to include it instead. Oct 25, 2017 at 21:14

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