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RayJJohnsonJr

MAX DC + DB CONTRIBUTION

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I HAVE A CLIENT WHO'S A SELF EMPLOYED ATTORNEY, SCHEDULE C FILER, AGE 65, AVERAGE ANNUAL COMP OF $700,000 (NET SCHEDULE C). SHE MAXES OUT HER DC EVERY YEAR AND WANTS TO CONTINUE DOING THAT.  STARTING THIS YEAR, HOW MUCH CAN SHE PUT INTO A DB ON TOP OF THE DC? iF ANY.

tHANK YOU.

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I did not do the math but make sure that, she does not make any profit sharing (or any match, if it exists) contribution for 2020 during 2020 as 6% profit sharing (or any other employer) limit is going to kick in. If she has no 401k feature, she should add for 2020. If she puts in excess of 6% employer monies into the DC portion, less deductions will be very low (31% rule kicks in).

The next question is, how many year does she want to contribute. This would be a good way to determine the years of participation for 415 limit and what the 415 lump sum would be at the end of so many years.

 

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WE COULD SAFELY USE RETIREMENT AGE ANYWHERE BETWEEN 70 AND 75.  WHATEVER GIVES THE BIGGEST DEDUCTION.  AFTER WE IMPLEMENT YOUR RECOMMENDATIONS FOR HER DC PLAN,  WHAT IS THE MAX SHE CAN PUT THERE.  IT SOUNDS LIKE THE MAX 401(k) LIMIT, BUT NOTHING MORE.  THANK YOU FOR YOUR HELP.  

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I'm sorry.  I'm just a bad typist and typing all caps simplifies it for me.  I didn't think any one would think I was yelling, based on the content.  I guess i should go to all lower case from now on including benefits link. 

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Just a follow up on the dc side. She can do full 401k plus 6% of eligible salary so could be up to 17.1k of profit sharing for 2020 and this is all the employer monies she can put in. The profit sharing portion will have to calculated once the schedule c and the defined benefit plan limits are determined.

Sorry did not work out the db end but it is over 200k/year.

So she can look at, between the 2 plans over 250k/year.

Actual calculated numbers will yield more but this is a good start and hope it helps.

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Agree with most of what's been written so far. This is an essay question and one of our actuaries would need to discuss goals and objectives with the client to determine the best answer. There are a number of limitations that apply here on the amount that should be discussed as well.

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