409 | 401(k), Mega Backdoor Roth, and the Premium Tax Credit

Most people worry that leaving their W-2 job means diving into a tax nightmare — but what if the opposite were true? Self-employment opens doors to retirement accounts and tax strategies that traditional employees can't access, yet fear of the unknown keeps countless would-be entrepreneurs stuck in corporate life. Sean Mullaney — tax expert and author of Solo 401k: The Solopreneur's Retirement Account — joins Brad to break down the mechanics of self-employment taxation, retirement planning, and healthcare subsidies. Both income tax and self-employment tax come into play when you work for yourself, requiring estimated quarterly payments instead of automatic W-2 withholding. The conversation then shifts to the Solo 401k, which replicates (and often exceeds) the benefits of traditional employer-sponsored plans while giving you full control over your investment choices and higher contribution limits. The episode closes with a deep look at the Premium Tax Credit for Affordable Care Act plans, explaining how self-employed individuals and early retirees can strategically reduce their modified adjusted gross income to qualify for better subsidies — a crucial consideration for anyone seeking affordable healthcare outside of employer coverage. Chapter Markers Introduction to Self-Employment and Taxation [00:00:00] Estimated Tax Payments Explained [00:08:11] Understanding the Solo 401k [00:19:51] Premium Tax Credit Overview [00:54:05] Conclusion [01:09:05] Key Insights "Taxes shouldn't deter you from pursuing self-employment." [00:03:22] "Knowledge empowers you to leave your W-2 job without fear of taxes." [00:19:34] "Self-employed? You can still save effectively for retirement." [00:23:11] "Consider Roth conversions if you're early retired and have low income." [01:01:23] "Use IRS Pub 560 to help calculate your employer contributions." [00:44:01] Related Resources IRS Publication 560 — Calculating employer contributions [00:44:01] Healthcare.gov Premium Tax Credit — Premium tax credit information [01:07:18] ▶ Listen Next: Ep. 421 — Secure Act 2.0 Deep Dive: What Changed for Retirement Savings | Essential Listening