Harvard Law Attorney George Blower leads an in-depth discussion of the 2024 Solo 401k Contribution rules to help you determine how much self-employment income you need to make to maximize Solo 401k contributions. This webinar is geared towards self-employed businesses taxed as an S-corporation, C-corporation, LLCs taxed as S-corporations/C-corporations.

*​**Free Solo 401k*** Learn how opening a Solo 401k in 2024 will qualify you to claim a $1500 tax credit including a $500 credit on your 2024 taxes and then another 2 years after that for a total of $1500.

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The solo 401k plan, commonly referred to as self-directed Solo 41k is the retirement plan of choice for self-employed individuals or owner-only businesses including for the features highlighted below:

-The highest contribution limits for any defined contribution plan including up to $69,000 (or even $76,500 if you are 50 or older) for 2024.

-The ability to make pre-tax, Roth, and even Mega Backdoor Roth contributions.

-401k participant loans of up to $50,000

-Invest with checkbook control in real estate, cryptocurrencies, notes, private placements, and other types of alternative investments.

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As a self-employed individual with an S-Corp structure, setting up a Solo 401k can be a powerful tool for saving for retirement while also reducing your tax burden. One common question that arises when considering a Solo 401k is how much in W-2 wages are needed to maximize contributions.

In 2024, the maximum contribution limit for a Solo 401k is $61,000 for individuals under the age of 50, and $67,000 for those 50 and older. This includes both employee and employer contributions. To maximize these contributions, you will need to ensure that your W-2 wages are sufficient to support them.

To calculate the “magic number” of W-2 wages needed to fully fund your Solo 401k contributions, you’ll need to consider a few key factors. First, you’ll need to determine your desired employee contribution, which is limited to 100% of your W-2 wages up to the annual limit. For example, if you want to contribute the full $19,500 as an employee under 50, your W-2 wages must be at least $19,500.

Next, you’ll need to calculate your employer contribution, which is limited to 25% of your W-2 wages. To simplify the calculation, you can use the following formula:

W-2 wages needed = Employee contribution limit + (Employee contribution limit / 0.25)

For example, if you want to maximize your contributions as a 50-year-old individual in 2024, your W-2 wages must be at least $268,000 (($67,000 + $67,000) / 0.25).

It’s important to note that W-2 wages for Solo 401k contributions are based on your S-Corp’s profits, not just your salary. Therefore, if your S-Corp is not generating enough income to support the desired contribution levels, you may need to adjust your salary or explore other options to maximize your retirement savings.

In conclusion, determining the “magic number” of W-2 wages needed to fully fund your Solo 401k contributions requires careful consideration of your desired contribution levels, age, and S-Corp profits. By understanding these factors and planning accordingly, you can take full advantage of the benefits of a Solo 401k as a self-employed individual with an S-Corp structure.