Kathy is 60 years of age and self-employed. During the year she reported $400,000 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)?

Question

Quizplus · Accepted Answer

She may contribute the lesser of (1) $53,000 or (2) $75,727 [20% × ($300,000 - [((300,000 × .9235 - 118,500) × 2.9% × 50%) + (118,500 × 15.3% × 50%)])] + $18,000. 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 $59,000 ($53,000 + $6,000).

Kathy Is 60 Years of Age and Self-Employed