Retirement Savings options for Non 401K employees

12 Replies

Our current employer does not offer 401K. Started to invest on Roth IRA from past 5 years. The max is only 5.5K yearly contributions we can as per IRS limits. But some of my friends who work has 401K offered by their employer and they can contribute max of 18.5K year

to their 401K yearly. I wanted to contribute more towards retirement. Apart from this Roth IRA, where else can I save or contribute for my retirements. Are there other 401K plans which individuals like me can open on our own and contribute .

Thanks in advance.

Yes John, there are Individual 401k plans, but they are designed for those who are either self-employed for own a small business. If your only source of income is your employment wages you will be limited to IRA as far as retirement savings if your employer does not offer 401k.

Dmitriy,

Thanks for the reply.  If we already setup  company as "sole proprietor"   ( dba- doing business as) Single owner .

Can we then stat the Solo 401K plan.  I mean the Roth(401K) plan ?

Should the contributions to this Roth(401K) -Solo come only from the business income ?

Or can we contribute from our personal wages income (w2) also ?

I’ve been reading about a “Back Door Roth IRA”. Which is saving money into a traditional IRA, and rolling that over into a Roth IRA. Maybe you can contribute to your Roth IRA until you have reached your max, and continue to contribute into your traditional IRA, and then over time roll your traditional IRA into a Roth IRA.

John,

You need more than just a dba to be eligible for a Solo 401k plan: you must have legitimate self-employment activity or business with the earned income.

If you are eligible - yes! You can have Roth Solo 401k.

Contributions to Solo 401k can only be made from the earned self-employment income, your W2 wages from employment have nothing to do with your ability to contribute to your Solo 401k. 

Originally posted by @David Martinez :

I've been reading about a "Back Door Roth IRA". Which is saving money into a traditional IRA, and rolling that over into a Roth IRA. Maybe you can contribute to your Roth IRA until you have reached your max, and continue to contribute into your traditional IRA, and then over time roll your traditional IRA into a Roth IRA.

The max contribution limit to both Roth IRA and traditional IRA is only 5.5K

Even if you contribute to both accounts it is only 5.5K per year.

Originally posted by @Dmitriy Fomichenko :

John,

You need more than just a dba to be eligible for a Solo 401k plan: you must have legitimate self-employment activity or business with the earned income.

If you are eligible - yes! You can have Roth Solo 401k.

Contributions to Solo 401k can only be made from the earned self-employment income, your W2 wages from employment have nothing to do with your ability to contribute to your Solo 401k. 

Does that mean employees(W2) if there work doesn't offer 401K option, will have to stick with Roth IRA or Traditional IRA

and stick with max contribution of 5.5K/year.

Originally posted by @John Paul :
Originally posted by @Dmitriy Fomichenko:

John,

You need more than just a dba to be eligible for a Solo 401k plan: you must have legitimate self-employment activity or business with the earned income.

If you are eligible - yes! You can have Roth Solo 401k.

Contributions to Solo 401k can only be made from the earned self-employment income, your W2 wages from employment have nothing to do with your ability to contribute to your Solo 401k. 

Does that mean employees(W2) if there work doesn't offer 401K option, will have to stick with Roth IRA or Traditional IRA

and stick with max contribution of 5.5K/year.

 Yes, that is correct.

@Dmitriy Fomichenko - are you penalized if you contribute more than the 'max' to a Roth IRA? I thought (and could be wrong) with a Traditional IRA you didn't get the tax write-off on the excess contribution, but no penalty. What impact does it have on Roth?

@John Paul

Unfortunately you won't be able to contribute to a retirement plan like a 401k or a 403b, for example, as these types of plans are only offered by employers. However, a solo 401k plan may be setup if you are self-employed. Self-employment activity is defined in IRS Publication 560 (the publication for self-employed plans including SEPs and solo 401k plans), and the self-employment activity can be performed on a part or full-time basis. 

https://www.irs.gov/publications/p560

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