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If you have income from self-employment, you can make tax-deductible contributions to either a Simplified Employee Pension (SEP) or a solo 401(k). The amount of money you contribute to your 401(k) may affect the amount you can contribute elsewhere. Here are the details on stowing away money for retirement when you have a side hustle.

Simplified Employee Pension and Side Hustles

You can contribute up to 20% of your net self-employment income to your SEP. Contributions are limited to $55,000 a year. Your contributions grow tax-deferred until you withdraw money in retirement.

Most firms that offer IRAs also offer SEPs. They typically offer similar investing options and comparable fees. Contributions to your regular 401(k) don’t affect your SEP contribution limits.

Side Hustles and Solo 401(k)S

With a solo 401(k), you’re allowed to put away a healthy chunk of change because you can contribute as both an employee and an employer. You can contribute up to $55,000 a year to your solo 401(k), also known as an individual 401(k).

People 50 years or older can contribute up to $61,000 a year by making catch-up contributions. Solo 401(k)s  can have high fees. Not as many firms offer solo 401(k)s as they do SEPs. Some solo 401(k) providers also offer Roth solo 401(k)s. Roth 401(k)s allow you to pay taxes upfront so that you don’t have to pay taxes later in retirement with a Side Hustle.

Full-Time 401(k) Affects Solo Contributions

The contributions you make to your 401(k) through your full-time employer may affect how much you can contribute to a solo 401(k).

If you’ve already maxed out your regular 401(k), you can still contribute up to 20% of your net self-employment income to your solo 401(k). The combined contributions just can’t exceed $55,000 if you’re under 50, or $61,000 if you’ve made catch-up contributions.