Kathy is 60 years of age and self-employed. During 2018, she reported $500,000 of revenues and $100,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k) for 2018? (Round your final answer to the nearest whole number)
A) $55,000.
B) $61,000.
C) $95,837.
D) $77,337.

Question

Quizplus · Accepted Answer

She may contribute the lesser of (1) $55,000 or (2) $95,837 [20% × ($400,000 − [((400,000 × 0.9235 - 128,400) × 2.9% × 50%) + (128,400 × 15.3% × 50%)])] + $18,500. Because she is at least 50 years of age at the end of the year, she may contribute an additional $6,000 as a catch-up adjustment in addition to the lesser of (1) or (2). So she may contribute $61,000 ($55,000 + $6,000).

Kathy Is 60 Years of Age and Self-Employed