Can I set up a second 401(k) at my LLC?

Question

I have a 401(k) at work. I also have an LLC. Can I start a second 401(k) and contribute an additional $16,500?

Answer 1

You can have multiple 401(k), but the $16500 maximum is per person, not per account.

Answer 2

Yes, but be aware of the following limits, which apply across all accounts (not on a per-account basis):

• You, as the employee, can contribute up to $16,500

• Your company, as the employer, can contribute up to 25% of your compensation

• The combined employee and employer contribution may not exceed $49,000

• If you are over age 50, you are entitled to an additional $5,500 "catch-up" contribution

• The total amount of your contribution cannot exceed your total compensation

(Limits apply for 2011)

Keep in mind that you can also contribute up to $5,000 to an IRA -- however, unlike the 401(k) contribution, it will not be tax-deductable.

Answer 3

No, but you can deposit into a SEP IRA, 20% of income up to $45k if I recall correctly.

(Wow, $45K was so 2007, it's up to $49K this year 2011)

Answer 4

If you want to raise your contribution ceiling a bit, you may also invest in a personal Roth IRA up to $5K a year in addition to maxing out your 401(k). It is my understanding that the same is not true of a traditional IRA.