3 ms·

Not sure how you'd get anywhere near $500,000 (employing a spouse and a couple of your kids offering them maxed-out matching contributions, too, maybe?) but I d

Not sure how you'd get anywhere near $500,000 (employing a spouse and a couple of your kids offering them maxed-out matching contributions, too, maybe?) but I do suspect the most common way anyone approaches the 401k contribution limit is through kinda-shady family businesses in already-rich families. AFAIK you can't even hit 50% of the annual limit without nearly-unheard-of employer matching, because such a high proportion of the annual limit can only come from an employer—you can't contribute it yourself. Still, without some real weirdness I'm not sure how you'd get near $500,000, even factoring in HSAs (primarily another tool for the already-well-off to avoid taxes—the trick is that if you put money in but never pay medical bills out of it you can save those receipts and get all that money you would have spent tax-free at retirement, while it's been growing all those years pre-tax like a normal retirement account) and using both IRAs and 401Ks.

yieldcrv 4y ago
When you attach your a single participant 401k to your own S-Corp (or to even just yourself as an individual), you can do maximum employer match alongside maximum employee contribution. This moves your max retirement contribution from $20,000 to $60,0000 as of time of writing. (you can also do the employee contribution exclusively with your W-2 employer, and if you have other sources of non-passive income you can just do all employee match for the other $40,000 into your own) then you can also construct a Cash Balance plan, which adds a lot more and linked to your age, every year. ie. a 30 year old can contribute maybe $80,000 while a 65 year old can contribute maybe $450,000. Its not a "above age 50 catch up" like 401ks and IRAs have. any cash amounts in any of these plans can be rolled over into whichever other kind of retirement plan is preferred. so if you don't like compliance duties of a 401k, you can roll that into an IRA. If Cash Balance plan is too restrictive on investable assets, you can roll that into a 401k or IRA. You can roll any of this into the Roth products if you don't mind paying income tax that year.
- yamtaddle 4y ago
  Oh damn—good tricks, thanks, and I didn't realize you could do the 401k max-out thing as a sole proprietor. Tax-advantaged retirement plans in the US really do seem structured to be nearly useless for normal employees, and very useful to those with a high incomes and a good deal of flexibility in how they structure their finances. I'd like to think that's an accident, but it's probably not. [EDIT] Last bit not directed at you, just an observation. You gotta do stuff like this, if you can, or get screwed. Which sucks, but those are the rules.
  - yieldcrv 4y ago
    well there is a populist push to get rid of contractors (California AB5, other states, Biden's plan), kind of ignoring that there are high earners running their own plans intentionally as opposed to someone relying on employer health insurance and paid leave but fortunately I think that push is ignoring when an individual applies for the role as a single member LLC or other incorporated entity they control

yieldcrv 4y ago

When you attach your a single participant 401k to your own S-Corp (or to even just yourself as an individual), you can do maximum employer match alongside maximum employee contribution. This moves your max retirement contribution from $20,000 to $60,0000 as of time of writing. (you can also do the employee contribution exclusively with your W-2 employer, and if you have other sources of non-passive income you can just do all employee match for the other $40,000 into your own) then you can also construct a Cash Balance plan, which adds a lot more and linked to your age, every year. ie. a 30 year old can contribute maybe $80,000 while a 65 year old can contribute maybe $450,000. Its not a "above age 50 catch up" like 401ks and IRAs have. any cash amounts in any of these plans can be rolled over into whichever other kind of retirement plan is preferred. so if you don't like compliance duties of a 401k, you can roll that into an IRA. If Cash Balance plan is too restrictive on investable assets, you can roll that into a 401k or IRA. You can roll any of this into the Roth products if you don't mind paying income tax that year.

yamtaddle 4y ago
Oh damn—good tricks, thanks, and I didn't realize you could do the 401k max-out thing as a sole proprietor. Tax-advantaged retirement plans in the US really do seem structured to be nearly useless for normal employees, and very useful to those with a high incomes and a good deal of flexibility in how they structure their finances. I'd like to think that's an accident, but it's probably not. [EDIT] Last bit not directed at you, just an observation. You gotta do stuff like this, if you can, or get screwed. Which sucks, but those are the rules.
- yieldcrv 4y ago
  well there is a populist push to get rid of contractors (California AB5, other states, Biden's plan), kind of ignoring that there are high earners running their own plans intentionally as opposed to someone relying on employer health insurance and paid leave but fortunately I think that push is ignoring when an individual applies for the role as a single member LLC or other incorporated entity they control