A 401(k) has two contribution buckets: an employee deferral and an employer contribution. The employee deferral is capped per person across every 401(k) the worker participates in, including a day-job 401(k) and a Solo 401(k). The employer contribution is capped per plan, so contributions can stack across separate plans. This means a side hustle can increase total annual retirement contributions if the employee portion is kept within the shared limit while the employer portion is maximized in each plan. Misallocating the split can cause excess-deferral taxes and require corrective distributions. Correct management can shelter tens of thousands more per year than a coworker without self-employment income.
"If you are working at a company that has a 401(k) plan and you want to do the solo 401(k), you have to be mindful of the employee portion. So that's the $24,500. The stakes are concrete. Mismanage the split, and you owe excess-deferral taxes plus a corrective distribution. Manage it correctly, and you can shelter tens of thousands more per year than a coworker without 1099 income."
"A 401(k) has two contribution buckets. The employee deferral is capped per person across every 401(k) you touch. The employer contribution is capped per plan. Your day-job 401(k) and your Solo 401(k) are two separate plans, so the employer contribution stacks across both, while the employee deferral remains a single shared cap."
"The example from the segment: If you do $20,000 in your 401(k), you can do $4,500 as the employee portion in the solo 401(k), but you can still do the employer contribution. Consider a 45-year-old freelance consultant with W-2 wages of $90,000 and a 1099 net profit of $80,000. She defers $20,000 at her day job, le"
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