Friday, June 26, 2009

Special Slott Report Mailbag Q&A;

We left out a question and answer from yesterday's mailbag, and instead of making our readers toggle through the previous post to see it, we decided to devote some space to it right here.

If I have a full time job and contribute the max to my work 401K and I also have a Schedule C part time business. What is the maximum amount I can contribute to my SEP IRA for my part time Schedule C business? I have read conflicting information. One source said I needed to reduce my SEP IRA contributions by the amount I contributed to my work 401k but another source said that was not true and I would only be limited by the 20% of self employment income rule. Can you please clarify this for me?

Thank you,

Adam Lazarus


Answer:
Assuming the two businesses are unrelated and not affiliated, you could contribute the maximum amount to your SEP IRA. The contributions to his 401(k) plan does not affect the contributions to the SEP IRA and vice versa. As a result, his SEP IRA contributions can be (up to): $49,000 or 20% of his modified net profit, whichever is less.

Have a great weekend!

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