Expert: Allen - 11/22/2007

Question
Hello,

I have two jobs; one at a bigger company providing me a 401k plan and my own company. I am looking to set up a solo 401k for my own company. My question is, can I have two 401k plans at the same time? Or do I need to choose one of the two, in this case my own solo401k so I can contribute $45,000. Or can I keep both and make sure I don't contribute more than $45,000? PLease advice. Thank you.

Jeroen  

Answer
You can not double up on the 401k contributions. You can contribute a total of $15,500 (or $20,500 if you are 50 or older) to both plans.

You can set up either a SEP or a profit sharing plan for your own company (assuming it is independent of the company where you earn wages). The contribution to the SEP or profit sharing plan can be as much as the lesser or $45,000 or 25% of your "income". For this purpose if your business is incorporated, income is your W-2 wages. If your business is not incorporated income is your Schedule C income minus the contribution to the plan and also minus 50% of the self employment tax paid on the Schedule C income (in effect approximately 19% of your Schedule C income).