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Mini 401-K--not such a great deal?
- Thread starter Toonces
- Start date
Quote from AAAintheBeltway:
OK, I guess the problem is that you can only fund a 401 k out of earned income, but then you have a problem with corporate level taxes on top of what you pay as an "employee."
The only entity that makes sense for a trader is pass through (e.g. S corp or LLC). Paying any taxes at the corporate level is probably a mistake.
With a pass through entity that has capital gains, you can choose what you want to do with those gains. You can distribute the gains to yourself as the owner of the company, or you can pay salary to yourself as an employee of the company. The latter is generally disadvantageous since you pay SE taxes on earned income. The only reason to even consider paying youself a salary is if you need earned income for tax reasons, for example to take a health insurance deduction, or to contribute to a retirement account.
Martin
15) Can I trade my retirement account through a prop firm? Does that change the rules?
16) What is the minimum amout I need to make in order to maximize my contribution?
17) Can I start contributing now fro 2006, even though theoretically I might put away more money than I'm legally allowed to for the year? (If I have large unexpected losses)
16) What is the minimum amout I need to make in order to maximize my contribution?
17) Can I start contributing now fro 2006, even though theoretically I might put away more money than I'm legally allowed to for the year? (If I have large unexpected losses)
Quote from Sparohok:
With a pass through entity that has capital gains, you can choose what you want to do with those gains. You can distribute the gains to yourself as the owner of the company, or you can pay salary to yourself as an employee of the company. The latter is generally disadvantageous since you pay SE taxes on earned income. The only reason to even consider paying youself a salary is if you need earned income for tax reasons, for example to take a health insurance deduction, or to contribute to a retirement account.
So you could choose to pay one part as a salary (and place this into a Solo 401k) and keep the other part as capital gains. Are there some guidelines on ratios here?