Good evening everyone,
I wanted to check with the Mstar community to see if there are any more options available for Pre-Tax savings.
Me and my wife, file the taxes married jointly. Our income is in 32% bracket from my job. I contribute to 401k max, 457 max and HSA account. Cannot contribute to Roth IRA. My wife started her small business this fall. We have the S corporation LLC held jointly. She is employed by the business so will start to get the paycheck next week.
My question to all is to see if there is any way we can contribute pre-tax or post-tax (IRA) for her? I checked with our CPA. As per him, opening a 401k through our LLC will be costly as other employees will also have to be offered the benefit of 401k.
Thanks for all your time.
If your CPA cannot come up with suggestions for pre-tax, it is unlikely that you will get them here. At least max all pre-tax options that you have.
As for after-tax, you may be aware that before IRAs and 401k came along, people relied on annuities and insurance. For kids, use 529. For charities, use DAFs. Wife can also do nondeductible T-IRA and Backdoor Roth Conversion.
You may also look at tax-efficient investments [munis, ETFs, indexed OEFs].
You have to offer the same match to all employees, as your CPA says. The Department of Labor rules mandate you do not discriminate in favor of highly compensated employees.
But, you don't have to offer a match to anyone, that remains your call as the employer. If you are not offering any match, your wife can still contribute to the full amount as an employee, about 19K I think, plus 7K if she is over 50 years. Mind you, I am not recommending you do this. Encouraging employees to save for their futures by matching their 401k contributions is socially responsible behavior on part of employers, in my opinion.
Many years before I retired from the corporate world I had a business under subchapter S, which was the setup I was advised to use. As the business got rolling I took a year end bonus and used it to fund a nondeductible T-IRA. I contributed the max at that time and did that for 3 or 4 years. It became a tidy sum by retirement which has been a wonderful supplement to my 401K savings from my corporate stint. If you have time on your side, you won't regret it. Unfortunately Roths were still fairly new but were I doing it today and was eligible I'd go for a Roth.