Figuring out retirement savings from multiple incomes
March 18, 2020 1:33 PM   Subscribe

I've been trying to figure out how to maximize my retirement contributions. I'm currently employed part time at non-profit which contributes to a 403(b) with some matching. I also do contract work where I'm self employed. I'm trying to pick between the options for the contract money (SEP, Simple IRA, Traditional IRA, individual 401k, etc.).

I went so far as to set up an individual 401k before finding this site claiming it would interfere with my 403(b), but I can't find any information about this exception. Has anyone been in this situation or know where to look for guidance? I've had a lot of trouble finding anything that deals with having both kinds of employment.
posted by axlan to Work & Money (6 answers total)
Is your income high enough for that to come into account, ie: "which limits your aggregate contributions to both plans to $56,000 plus a catch-up contribution of $6,00." ?

If not then you don't really need to worry about it. In general, if you want to maximize your retirement contributions (and minimize your current taxable income) you should contribute to your 401k or 403b to it's max and then if your income allows it, a traditional or ROTH IRA, just depending on whether you need more income now (traditional reduces taxable income now) or lower tax in retirement (ROTH IRA withdrawals at retirement age are tax free, they have no impact on current taxable income). You should max your 401k first, because the income limits are super high compared to an IRA (either type), and the benefits and restrictions aren't that different.
posted by The_Vegetables at 2:32 PM on March 18

If your income that you will be putting into your retirement accounts is high enough for that to account (ie: you are able to put more than $56000 per year into a retirement account), then you really need a retirement professional.
posted by The_Vegetables at 2:33 PM on March 18

Yeah, what are your goals and how much are you planning to contribute? If it’s less than $25,500 a year, all you need is your existing 403b and a traditional IRA.
posted by mskyle at 3:36 PM on March 18

I guess the first thing that was confusing is the salary deferral contributions. this IRS site seems to indicate that you have a max of 19500 across all your plans, but I've seen elsewhere that the IRA's have separate deferral caps.

My understanding is that it would make more sense to put my contract money in a separate plan if my contributions to the 403b would be over 19500 and the other account had a separate deferral limit.
posted by axlan at 4:14 PM on March 18

Traditional and Roth IRAs have a different, unrelated cap - $6000 for most people. But all the employer plans have their own cap (generally $19,500 - I believe the $56,000 The_Vegetables is talking about would include an “employer contribution” from your employer (i.e. yourself for your self-employed work). I’m very much not an expert, though, and I’ve never done what you’re doing but I did once change from a job with a 403b to a job with a SIMPLE.
posted by mskyle at 4:54 AM on March 19

Traditional and Roth IRAs have a different, unrelated cap - $6000 for most people.

Yes that is right. The $19500 of your portion contributed is the max cap for tax deferrals for 401ks and 403bs and they all combine together. You can contribute more, you just have to pay income tax on it.

The cap for individual IRAs outside of employer sponsored plans is $6000, they are separate.
posted by The_Vegetables at 7:41 AM on March 19

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