Self-employed dummy: Is an NQDC plan right for me?

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neverpanic
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Joined: Sun May 10, 2020 12:26 am

Self-employed dummy: Is an NQDC plan right for me?

Post by neverpanic »

I'm self-employed (W-2) and most of my income is from K-1 partnership distributions. I'm maxing SEP IRA and HSA contributions.

I've consulted with a few agents about defined benefit plans, but they're being presented as complicated and expensive to set up and administer. I'll likely continue moving in that direction over the next couple of years, but wondered whether I may be able to start a NQDC plan in the meantime.

The primary negative - apart from a company going out of business - I have read is that the employer does not get to take the deduction until the employee receives the compensation. Mechanically, would I be able to lower my taxable income now and then pay the appropriate tax when I receive a distribution from the plan at some future date?

Goals:

decrease near-term tax liability
increase availability of investable capital now
income protection in the event main company crashes or goes out of business

1) Am I looking at the NDQC concept correctly?

2) I do not see anything in the regs that would prevent me from funding one with K-1 income, even though my W-2 income is significantly less. Did I miss something? Is my W-2 salary the contribution limit?

3) I will attempt to enlist the help of a pro on the front end, but assuming it's the right idea for me, is the NQDC plan something that a layman can DIY after it's set up?

Any information or experience you could share would be greatly appreciated.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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