Comments on: Generating Passive Income from Passive Income

By: 401k contribution tax credit

401k contribution tax credit — Wed, 14 Jul 2010 15:57:14 +0000

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By: kamren

kamren — Mon, 14 Dec 2009 17:46:20 +0000

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By: Hawaii Honeymoon

Hawaii Honeymoon — Sun, 05 Jul 2009 18:48:42 +0000

I liked so much my honeymoon vacations . I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Look forward to reading more from you in the future.

By: Steve @ Start-Up

Steve @ Start-Up — Tue, 03 Mar 2009 21:04:38 +0000

@me3, I don’t know if I can answer the payroll taxes question. My most recent blog post shows how I calculated my 401k contribution. Vanguard also has a pretty nifty contribution calculator that shows you how much you can contribute in the various retirement savings vehicles. It’s all based on net business profit.

https://personal.vanguard.com/us/SbsCalculatorController

Steve @ Start-Up´s last blog post..How to Calculate your Self-Employment Tax and Solo 401k Contribution

By: me3

me3 — Tue, 03 Mar 2009 20:45:03 +0000

@Steve @ Start-Up, I was sort of getting at this in my comment above. I’m not sure how it works, but I question whether payroll taxes must be deducted from your earnings before determining how much one can put in a Solo 401(k). This is assuming what you made was under ~$15k. Where did you get your basis for being allowed to contribute everything you earned? This is exactly what I want to do.

By: Steve @ Start-Up

Steve @ Start-Up — Tue, 03 Mar 2009 20:39:29 +0000

@RJ Weiss, Vanguard allows you to contribute to a Roth Individual 401k.

By: Steve @ Start-Up

Steve @ Start-Up — Tue, 03 Mar 2009 20:38:45 +0000

I opened my Vanguard Individual 401k right at the end of 2008. I really liked the low cost investing options that Vanguard provides. I chose to open an individual 401k so I didn’t have to worry about quarterly estimated taxes as I put all of my self-employed income into my 401k.

By: Steve @ Start-Up

Steve @ Start-Up — Tue, 03 Mar 2009 20:32:23 +0000

@LS, Wow I hope you're kidding. You in fact make no money by putting it under the mattress. That's actually the definition of putting money under the mattress. 401k's are wonderful investing opportunities. Steve @ Start-Up´s last blog post..How to Calculate your Self-Employment Tax and Solo 401k Contribution

By: Steve @ Start-Up

Steve @ Start-Up — Tue, 03 Mar 2009 20:30:58 +0000

@me3, I tutor on the side as a self-employed contractor and have not officially registered my business. I report my income for tax purposes as it is against the law not to. There is no need to formally register anything. It might be a good idea to do so. Pat wrote a post earlier about setting up an LLC and mentioned the pros and cons. Don't forget to make quarterly tax payments. Steve @ Start-Up´s last blog post..How to Calculate your Self-Employment Tax and Solo 401k Contribution

By: RJ Weiss

RJ Weiss — Mon, 02 Mar 2009 16:44:59 +0000

Maria....A Roth IRA and an Individual 401K are both great investments. There is no problem with doing both. As a general rule of thumb, if you think your income will be going up, choose a Roth. If you think your income will be stable or lowering choose a 401K. Unfortunately, it's hard to find a company that administers a Roth Individual 401K. Also, if you're planning on making six figures soon, contribute to a Roth IRA while you can. Just some things to think about before you make your decision. As for LS, your right nobody has made money lately investing in stocks. However, you're forgetting about the tax savings you get. If you're in the 25% tax bracket and contribute $10,000 that's the same as $2,500 in cash. For an investors that doesn't have the risk tolerance, there are plenty of investments out there that at least maintain inflation. RJ Weiss´s last blog post..Investing in Bond Mutual Funds

By: Maria -- WriterGig

Maria -- WriterGig — Sat, 28 Feb 2009 23:45:38 +0000

Very interesting — I wonder if it would make sense to max out a Roth IRA first, though, because of the tax benefits of a Roth? Someone with better financial planning skills than myself needs to tackle tat one.

Maria — WriterGig´s last blog post..What is Blogging?

By: pfincome

pfincome — Sat, 28 Feb 2009 04:36:49 +0000

I hope to take this step this year. I really like the breakdown you provided as it helps to visualize everything. pfincome´s last blog post..Peer Lending - Review of 2008 Prosper Rate of Return

By: LS

LS — Sat, 28 Feb 2009 03:27:35 +0000

I’ve never met a person who’s made a dime with a 401k. I have to say, I think of them as a type of scam. Literally- ask around and find out if anyone you know has ever made any money in one at the end of their term. that doesn’t men money on paper, I mean for the long haul. I wonder if anyone ever has. I’ve had at least 15 people tell me that they wished they’d never put any money in their 401k. You can make more by putting it under a mattress.

By: RJ Weiss

RJ Weiss — Fri, 27 Feb 2009 22:29:34 +0000

Not being familiar with your laws, it’s hard to say. You can earn income without registering as a business. You just have to report it. Here’s is an IRS article that might help you – http://www.irs.gov/newsroom/article/0,,id=175963,00.html

Registering as a formal business can have a lot of benefits. In my opinion it’s easily worth the expense up front, not to mention the liability protection.

I would wait till after April 15, and sit down with a CPA who you explain your situation to.

RJ Weiss´s last blog post..Understanding Bonds: What are Bonds?

By: me3

me3 — Fri, 27 Feb 2009 19:50:14 +0000

I just started “freelancing” this year and have earned $1800 so far. I also have a day job without a 401(k) of any sort. I am looking into setting up a Solo 401(k) with Fidelity but have no idea how to handle taxes on this. Should I have formally created a Sole Proprietorship or LLC before having done any work this year? I have done nothing formally in terms of registering with the gov’t. What next step should I take to “protect” this money? Assuming I only make this amount from freelancing, should I even register as a formal business? My state is SC. Thanks!

By: Jennifer

Jennifer — Fri, 27 Feb 2009 19:44:50 +0000

This is great information. I am not ready to take this step, but it is so good to know that this is an option. Thank you for sharing. Jennifer´s last blog post..Friday Thought On Happiness

By: Friday Quotables - Spring Training Edition | stretchyDollar

Friday Quotables - Spring Training Edition | stretchyDollar — Fri, 27 Feb 2009 15:38:12 +0000

[...] The Smart Passive Income Blog – Generating Passive Income From Passive Income “Passive income doesn’t have to stop once the money is earned. Wouldn’t it be nice to earn passive income, off passive income? [...]

By: RJ Weiss

RJ Weiss — Fri, 27 Feb 2009 15:06:52 +0000

Thank you!

I figured not everyone will be ready for this step, like myself. However, it’s always good to know the gold that’s at the end of the road with a little hard work.

By: Vik Dulat

Vik Dulat — Fri, 27 Feb 2009 14:37:41 +0000

Great post. 401k is the way to go. I love the spreadsheet which breaks it down even further. Vik Dulat´s last blog post..How I enjoyed a $735 weekend for $28