u/Lazy_Vegetable1510

I have an MBDR but want to ensure proper usage and mechanics

My understanding is that 401k discusses CODA and as such elective deferrals fall under this for valid deferrals of wages and the December 31st election requirement. Hence why elective deferral form must be signed by this date.

Conversely I believe the Treas Reg explicitly delineates voluntary after tax contributions from 401k doctrine and they fall under 401m. As such are voluntary after contributions in a separate sub account under a 401k plan not required to have December 31st election.

Or do they just use a separate form and still require election to be in compliance with plan administration mechanics. It's unclear what is operationally valid and required for compliance both in terms of form / plan admin duties and contribution deadlines for voluntary after tax per split regulations.

For employees on W2 wages it just comes out of payroll but for sole props this is more confusing. Sole props have no W2 wages and do not know net until year end. I believe the IRS classifies plan compensation as final day of tax deadline due to this

I commonly see solo 401k providers list elective and voluntary after tax as same deadline - by tax due date with extension - but I see no supporting doctrine for this. Elective deferral forms often use W2 payroll centric language along the lines of "X% of compensation per pay period" which seems to be mechanically invalid and legally indefensible for a sole prop under a 401k

Likewise there is a January 30 deadline under postulated under Regulations section 1.415(c)-1(b)(6)(i)(C) that seems it would apply to self-employed individuals, as discussed here.

https://benefitslink.com/boards/topic/68882-gross-up-a-partners-earned-income-by-after-tax-employee-contributions/

But this is very murky with unclear guidance. If true, it means voluntary after tax must be deposited by no more than 30 days after Dec 31 directly contradicting tax deadline with or without extension for contributions Solo 401k and other providers commonly cite

So where are they getting this from?

### Analysis of Points

I ran these items through kimi but the logic is not what I'd call sound. Reasoning given:

### Reasoning for Exclusion of December 31st Deadline for Deposit of Elective Deferrals

"a sole proprietor's compensation is treated as received on the last day of the individual's taxable year. Thus, an elective contribution made on behalf of a sole proprietor is treated as allocated to the partner's account for the plan year that includes the last day of the partnership taxable year, provided the requirements of paragraph (a)(4)(i) of this section are met."

This regulation does two things: (a) it deems the compensation received on Dec 31, which creates the Dec 31 election deadline, and (b) it treats the actual lump-sum contribution as allocated to that prior plan year if deposited within the 12-month window. The election is valid because it was made before the deemed receipt date. The contribution is valid because the regulation explicitly overrides normal allocation timing for self-employed individuals.

### Reasoning 30-Day window of Treas Regulation 1.415(c)-1(b)(6)(i)(C doesn't apply and it's up to tax deadline

"For a sole proprietor, the after-tax election can be made as late as October 15 with extension—the same deadline as employer profit-sharing contributions. This is because after-tax contributions fall under § 415(c) employee contributions, not § 401(k), and therefore the § 1.401(k)-1(a)(3)(iii) "currently available" rule does not apply to them.

But I don't see relation to 401m or Treas Reg here with this logic.

### Applied Regulations

1. Pre-tax and Roth deferrals → IRC § 401(k), § 402(g), Treas. Reg. § 1.401(k)-1, ADP test

2. After-tax contributions → IRC § 415(c), § 401(m), Treas. Reg. § 1.415(c)-1, ACP test

3. Employer contributions → IRC § 404, § 415(c)

4. Catch-up contributions → IRC § 414(v) (excluded from both 415(c) and 402(g)

That's the analysis given of unclear validity and none of this is my tax advice.

My understanding is that 401k discusses CODA and as such elective deferrals fall under this for valid deferrals of wages and the December 31st election requirement. Hence why elective deferral form must be signed by this date.

Conversely I believe the Treas Reg explicitly delineates voluntary after tax contributions from 401k doctrine and they fall under 401m. As such are voluntary after contributions in a separate sub account under a 401k plan not required to have December 31st election.

Or do they just use a separate form and still require election to be in compliance with plan administration mechanics. It's unclear what is operationally valid and required for compliance both in terms of form / plan admin duties and contribution deadlines for voluntary after tax per split regulations.

For employees on W2 wages it just comes out of payroll but for sole props this is more confusing. Sole props have no W2 wages and do not know net until year end. I believe the IRS classifies plan compensation as final day of tax deadline due to this

I commonly see solo 401k providers list elective and voluntary after tax as same deadline - by tax due date with extension - but I see no supporting doctrine for this. Elective deferral forms often use W2 payroll centric language along the lines of "X% of compensation per pay period" which seems to be mechanically invalid and legally indefensible for a sole prop under a 401k

Likewise there is a January 30 deadline under postulated under Regulations section 1.415(c)-1(b)(6)(i)(C) that seems it would apply to self-employed individuals, as discussed here.

https://benefitslink.com/boards/topic/68882-gross-up-a-partners-earned-income-by-after-tax-employee-contributions/

But this is very murky with unclear guidance. If true, it means voluntary after tax must be deposited by no more than 30 days after Dec 31 directly contradicting tax deadline with or without extension for contributions Solo 401k and other providers commonly cite

So where are they getting this from?

Analysis of Points

I ran these items through kimi but the logic is not what I'd call sound. Reasoning given:

Reasoning for Exclusion of December 31st Deadline for Deposit of Elective Deferrals

"a sole proprietor's compensation is treated as received on the last day of the individual's taxable year. Thus, an elective contribution made on behalf of a sole proprietor is treated as allocated to the partner's account for the plan year that includes the last day of the partnership taxable year, provided the requirements of paragraph (a)(4)(i) of this section are met."

This regulation does two things: (a) it deems the compensation received on Dec 31, which creates the Dec 31 election deadline, and (b) it treats the actual lump-sum contribution as allocated to that prior plan year if deposited within the 12-month window. The election is valid because it was made before the deemed receipt date. The contribution is valid because the regulation explicitly overrides normal allocation timing for self-employed individuals.

Reasoning 30-Day window of Treas Regulation 1.415(c)-1(b)(6)(i)(C doesn't apply and it's up to tax deadline

"For a sole proprietor, the after-tax election can be made as late as October 15 with extension—the same deadline as employer profit-sharing contributions. This is because after-tax contributions fall under § 415(c) employee contributions, not § 401(k), and therefore the § 1.401(k)-1(a)(3)(iii) "currently available" rule does not apply to them.

But I don't see relation to 401m or Treas Reg here with this logic.

Applied Regulations

1. Pre-tax and Roth deferrals → IRC § 401(k), § 402(g), Treas. Reg. § 1.401(k)-1, ADP test
2. After-tax contributions → IRC § 415(c), § 401(m), Treas. Reg. § 1.415(c)-1, ACP test
3. Employer contributions → IRC § 404, § 415(c)
4. Catch-up contributions → IRC § 414(v) (excluded from both 415(c) and 402(g)

That's the analysis given of unclear validity and none of this is my tax advice.

Lifestyle & FIRE:

My goal: Full Barista FIRE while maintaining contributions saving 80%+

Plan to base between Thailand, Vietnam, etc on DTV. Vietnam is an issue w/ visas, but whatever. When I see most people talk about FIRE, being expats, etc it almost exclusively boils down to SEA since you can be very frugal in a $200 / mo shack or get a $1200 condo. There's wide range for arbitrage.

I'm not new to this topic. I was a digital nomad in South America for years. I effectively already Barista FIRE as a nomad on semi-perm vacation contracting.

Financials / Accounts: 30. ~350k between Taxable Brokerage, Roth IRA, and Pre-Tax 401k.

Effectively 100k in each. Only started saving last 2 years aggressively.

Had some health issues, etc prior that ruined most of my 20s otherwise I'd be way ahead. My Solo 401k has a Mega Backdoor Roth allowing extended Roth IRA limits and vastly accelerated growth.

Assets: None. Always been abroad. Took off when I graduated. No car. No house.

Continued Contributions: 24.5k into Pre-Tax (via a W2) and 72k MBDR (Solo 401k) + 7k Roth IRA Backdoor for the next 5 years - at least - to aggressively push 80k/yr into IRA.

All spillover is in Taxable . Maybe 20k / yr into an ABLE account as a synthetic IRA since you can withdraw funds form this anytime for qualified expenses (living costs) but to my understanding you need to recertify disability annually which seems like a PITA. So, I'll exclude this despite the good vehicle.

Expenses and Estimated Living Cost. Already at Barista FIRE?:

Income is averaging 110k/yr with "personal expenses" from income at 79k/year for IRA "expense" of contributions, ~15k taxes due every year, and aggregate of 95k/yr "expenses" leaving 15k/yr left from 110k/yr. I'm budgeting 12k / year in SEA at 1k/month. I think this is VERY reasonable.

I'm an engineer, I fundamentally need to make shit to not be bored. So, I'm always contracting in some capacity - forever. A single paycheck for a week can be 4k+ for me. A single week of work could cover 4 months, easily, in SEA living frugally.

Anyone want to counter this? Why?

Even if this is off, my MBDR contribution drops and I get a slightly less massive Roth IRA. I'm being low w/ projection. I will be closer to 150k/yr with or without a W2 job sporadically for pre-tax 401k and taxable padding even if I pick up the shittiest part time W2 job or some marketing gig.

Planned Living / Locations:

The prior is fine. I don't party or drink or whore which is most people's expenses in Asia if they're being honest. I'm more of a sleep on a beach person.

I'm going to try SEA out because Da Nang, Hua Hin, etc are aligned. I value places that cater to retirees / expats in slowed down lifes with a beach. I'm not 18.

I don't value Mexico or South America anymore. Recent experiences weren't great and psychologically it damages you from living somewhere looking over your shoulder. Living there for awhile changed my behavioral patterns - that I still have.

I think Europe has become a complete shit hole and I'm good. I vehemently dislike paying 100 - 200 USD or Euros to sit in some shitty mold smelling hotel to go parade around shoulder to shoulder in a city with shit on the streets and the same gothic style architecture that nice the first 10 times I saw it.

Gauging the Projections, Growth, and Viability:

1. Never touch my growth funds - tenant of Barista FIRE
2. Preserve full MBDR exponentially accelerating Roth IRA
3. Get to live in SEA doing what I want while contracting on what I want
4. Any temp W2 I pickup is exclusively being routed into pre-tax 401k as upside, tax dampening, and spillover into liquid brokerage.

In 5 years I will have: 500k+ Roth IRA, 200k+ Taxable Brokerage, 250k+ 401k.

Those numbers alone are more than enough to LEAN Fire in terms of net growth if I stopped at 35 and never added another penny to retirement accounts covering expenses until retirement age. Hence Barista.

Enhancing the Strategy Further with Less Common Techniques:

I never see anyone discuss any of the below:

1. 0% LTCG strategies and / or synthetic Roth IRA - See my FEIE, FTC, S-Corp discussion here
2. Churning strategies for credit cards and banks
3. 0% APR cards with 15+ month cycles as continued net deferred growth
4. High ROI credit card churns on cashback (30 - 50% ROI)
5. Roth conversion from pre-tax in low income years

All of these make LEAN Fire, Barista FIRE, and even just general trips living in low cost areas like SEA vastly more viable as outlined below:

For 2) I made 3.5k USD from churning JUST bank accounts last year. That's a THIRD my proposed living cost for an entire YEAR. The velocity of banks (1 - 1.5 yr) don't allow this consistently but consistently allow ~1.5 - 2k / yr. This isn't expected to change anytime soon unless every bank magically stops doing SUBs.

3) There are credit card SUBS and also 0% APR cards with 15-21 month terms. The S&P averages 10%. Combining, we get ~3k/yr reduction from churn + APR cards. It's really closer to 4-5k/yr taking into account SUBS, but let's just say 3k.

So, on average I'd only need ~9k/yr in "non-dipped" funds in SEA instead of 12k/yr. Let's ignore the ~300 extra bucks in taxes from the 1099-INTs here lol.

That's a single extra project for me. So, I'm not feeling too concerned here. Even if this only lasted a few years for strategy it still inflates the curve in early years.

4) Cards with 30 - 50% ROIs: Quicsilver, Flex, etc giving $200 back on $500.

An apartment in Vietnam and Thailand ranges from 200 - 500. That's 1 - 2+ months of rent for each card used. Churning alone can halve living costs in SEA

Gauging Effectiveness of FEIE / FTC / S-Corp:

Not useful. I did a ton of digging and charting for these. If you want to counter, I'm open to arguments. But I didn't find any saving graces for these beyond high level parroting that didn't take into account nuance.

Why? Balances aren't high enough to leverage 0% tax bracket to do LTCG strategies and FEIE / FTC until at least 5 - 10 years out and they prevent contributions per no earned income.

You could argue you could use taxable under FEIE and do a synthetic Roth IRA and the funds would be liquid, which is true, but ENTIRELY depends on 0% LTCG.

I have 80k/year in Roth IRA principle, accrued each year, I could pull out at any point as freely withdrawable plus taxable brokerage and other liquid accounts. Or, likewise a loan against my 401k. Likewise, I have an ABLE account and this is better than a taxable brokerage with fully liquid funds at any points. So, there's zero net gain here.

Tracking FEIE is a pain. So is dealing with the FTC etc. Not worth it. S-Corp only serves to reduce future social security and requires a ton of overhead and gamification I don't want to do to still contribute at maximal sums.

Social Security (Scam Arguments) vs Taxable Net Growth:

Yeah, look. I'm right there with you, if you're going to argue that the net growth in a taxable brokerage vs the same sum in social security would be higher and as such you might qualify social security as a "scam" of a social program you pay into.

You are effectively subsidizing as a high earner.

But, social security is used as a security blanket pad for wages. You can't really opt out of FICA, etc being taken out of W2 wages so you're getting social security whether you like it or not either way. As such, the net differential gamifying an S-Corp year after year for the 5k(?) saved in taxes is so paltry it's not worth the effort.

You could just move states and get the same net.

My social security will probably be 2.5 - 4k a month depending on age taken. At my Roth IRA growth alone - why do I care? It's a nice pad, but not something I particularly need assuming the chart maintains and grows to millions at age of SS payouts.

But, the pad helps if it doesn't an simulators are off. It's a backup.

In conclusion, I see zero way this fails in any capacity. At worst, I have an off year - I limit or clip my MBDR contributions entirely - and the net effect is a slightly less large IRA which will still be millions.