Q. I saved the max to my 401(k) last year but I also had freelance income through an LLC I started. Can I start a retirement plan for that income?
-- Want to save more
A. We love to hear from those who want to save more.
You're in luck.
If you have a regular job and are self-employed you can put away money into both the 401(k) and a self-employed retirement account for your freelance income.
There are several self-employed accounts to choose from.
"The SEP-IRA is going to be the best choice for someone who has already maxed out a 401(k) at work," said Anthony Vignier, a certified financial planner and attorney with Vignier Investment Group in Kearny.
Per the IRS, the annual SEP-IRA contribution amount for 2017 is the lesser of $54,000 ($53,000 for 2016) or 25 percent of earnings of pre-tax dollars, Vignier said.
He said your contributions to the 401(k) will not reduce the amount you can contribute to a SEP-IRA as long as the 401(k) and SEP-IRA are with two different companies and not under the same ownership or control.
"So if you have extra income from your freelance income you can contribute to your SEP-IRA for 2016 by the due date -- including extensions -- for filing your federal income tax return for 2016," Vignier said. "If you obtain an extension for the filing of your tax return, you have until the end of that extension period to deposit the contribution, regardless of when you actually file the return."
Be sure to consult with a tax professional who knows your personal situation to make sure you do it right.
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com's weekly e-newsletter.
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