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Actually, it is a 401k plan, but one that will allow a one-person business to defer substantially more income for less cost under the new law in 2002 than that person could under old law in 2001. You can find details of one such product discussed at

TMFPixy: I am shamelessly looking for your free advice. <g> I have read your primer on retirement investment tools and I have read Publication 590. Now I have read your cite above. I am now in a partnership, but was a schedule C sole proprietor for 8 months of the year. Last year, I established a SEP and contributed to it. I have been extremely lucky and blessed this year and want to maximize my retirement contributions. This year, I want to contribute the max to my SEP. I also have an opportunity to contribute to the partnership 401(k).

My questions are:

1. Can I contribute to both my SEP and the partnership 401(k)?

2. Pub 590 says that the max I can contribute to my SEP is 15% or $30,000, whichever is less. But, for sole proprietors, there is a SEP contribution $25,500 cap. It goes further and seems to say, though, that one can also contribute to another qualified plan like a 401(k) plan, but there is a total $30,000 contribution limit between the two.

3. I would like to make the maximum contribution, but want to stay within the law and certainly don't want to get audited. Am I reading Pub 590 correctly?

Thanks in advance for your assistance. Happy Holidays, Mele Kalikimaka, and Aloha! NowInMaui
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