Can I Have an IRA and a 401k
A frequently asked question we receive is: Can I have an IRA and a 401k Solo plan at the same time?
The simple answer is, yes. You can have an IRA and a 401k Solo plan, at the same time. But the next question is: should you?
Consider the contribution limits of both. Between the two, the Solo 401k has much higher contribution limits. And with its almost unlimited investment options and simple administration, the Solo 401k may be the only plan you need.
Contribution limits of the Solo 401k
In 2013, the Solo 401k maximum contribution limit is $51,000 if you are under 50. If you are 50 and above, the maximum contribution limit per year is $56,500. Both of these limits have increased $1,000 from last year.
The Solo 401k allows contributions from both the employee deferral side and the employer profit sharing side.
- The maximum employee deferral contribution is $17,500 (in pre-tax or after-tax dollars) per year, if you are under 50. Those who are 50 years of age and older are also allowed an additional “catch-up” contribution in the amount of $5,500, for a total of $23,000.
- The maximum employer profit sharing contribution is 25% (or 20% if a sole proprietor or single-member LLC) of the compensation.
The combined total of the employee deferral and the employer profit sharing contribution equals the maximum contribution limit: $51,000 (if under 50) or $56,500 (if 50 and above). Compare that to an IRA’s contribution limits.
Contribution limits of the IRA
In 2013, the total contribution limit is $5,500 per year if you are under 50. If you are 50 and above, the limit is $6,500 per year.
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