​​

With over 60% of 2024 behind us, if you are like the majority of talented and driven professionals in the 35% and 37% tax brackets, you are exploring ways to increase retirement savings via Roth and traditional (pre-tax) avenues.

​
For many, there are options. While most professionals love their current career path, many have the time, energy and drive -- or their spouse has the time, energy and drive -- to launch a side business venture to fuel a personal passion, and / or fuel their pursuit for personal and professional growth.

​​​

For those with these intentions, here is a popular win-win strategy.

​

Employed professionals and couples contributing the maximum to their employer 401k plan can increase Roth or pre-tax retirement contributions by up to 46,000 per year +/- each ($ 92,000 total) by launching a side business venture and setting up a Roth or traditional (pre-tax) solo 401k plan as an employer contribution.

​

• The maximum solo 401k employer contribution is 20% of business adjusted net income for self-employed individuals.

• For individuals that are not self-employed, for example, an individual that sets up an S-corporation with one shareholder, the maximum solo 401k employer contribution is 25% of the shareholder's W-2 wages. 

• For individuals employing their spouses, the spouse can receive a maximum solo 401k employer contribution of 25% of W-2 wages paid. 

​

While many may not have the time to invest in business to obtain adjusted net income figures required to be able to qualify for the maximum $46,000 employer contribution, many are able to invest the time to generate adjusted net earnings to earn solo 401k employer contributions worth their while. 

Example:

 

• Mark and Jennifer are driven, and each launched self-employed consulting business venture in addition to their full- time position in January 2024.

• Each plan to make a $23,000 pre-tax contribution to their employer 401k plan. Both are under 50, and do not qualify to make the $7,500 catch-up contribution (or individuals over 50). 

• Mark and Jennifer each earn $150,000 in net income from their respective businesses in 2024.

• Mark and Jennifer's businesses are able to contribute 20% of their adjusted net income, $27,800 +/-, to each of their solo 401k Roth or pre-tax retirement accounts in 2024.

​

The Result:

​

• If Mark and Jennifer did not set up their side business ventures, 2024 retirement savings would be limited to the $46,000 - $23,000 each to their respective employer 401k account.​

• Launching their side business ventures allowed Mark and Jennifer to fund solo 401k Roth accounts by approximately $55,600 in 2024.

• Launching their respective side business ventures allowed Mark and Jennifer to increase 2024 retirement savings from $46,000 to over $100,000.

• Further, launching their side business ventures allowed Mark and Jennifer to increase annual Roth retirement savings by over $55,000 annually - far beyond the $ 14,000 ($ 7,000 each) backdoor Roth limit. ​​

​

​

​How We Can Help

​

If you are exploring ways to build and manage your evolving net worth, and exploring ways to increase retirement savings, give our office a call or fill out the form below. 

​

We'll discuss your goals and intentions, understand your current financial structure, share professional insight and perspective on strategies, elections and opportunities you will want to consider getting you from where you are today, to where you want to go.

 

If your household is pursuing launching an LLC, S-corporation, partnership or self-employment business, we'll discuss the essential elements of entity types relevant to your intent and share essential tax facts important to know. 

​

With 40% of 2024 ahead of us, for many there is still ample time to explore opportunities and implement changes to up-level 2024 financial and achieve superior tax outcomes. 

 

Next Steps

 

Give our office a call or provide your contact information below. 

 

Share details important for us to know along with a few dates and times you are available.

Let us know if you prefer meeting in person, over zoom or an initial phone conversation. 

 

We'll review our calendar and confirm one or your preferences or suggest a few alternate options.