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Second job savings
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April 24, 2000: 3:39 p.m. ET
Earnings from a part-time job can be a great opportunity for savings
By Elissa Buie
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NEW YORK (CNNfn) - If you work a second, part-time job, and want to use this as an opportunity to save, what are your options?
In response to a reader's question, Elissa Buie, a certified financial planner from Falls Church, VA and a member of the Financial Planning Association, suggested creating a SEP-IRA.
Ask the experts a question
I am a teacher in a public school system and therefore I can contribute up to $10,500 in 2000 in a 403(b). In the evening, I also teach part time where I am considered a "private consultant." This part-time job takes nothing out of my paycheck. Am I entitled to open a SEP-IRA for the portion of the money I earn as a private consultant? Can I contribute 15 percent or $25,000, whichever is "less," into this account besides my 403(b) and pension at my primary job?
First, accolades and pats on the back to you for being such a great saver. You'll thank yourself tomorrow for this foresight.
The simple answer to your question is, yes, you can do a SEP-IRA in addition to your employer provided 403(b) plan. The limits on retirement plan contributions are per employer for employer contributions and per taxpayer for employee contributions. So, your employer has a maximum contribution limit for your benefit. You as an employee (aggregated per person over all employers) have a maximum contribution limit. And you as an employer (and you can only count yourself once as an employer!) have a maximum contribution limit. Your SEP-IRA contributions count as employer contributions.
So, specifically, in addition to your salary deferral and employer contribution into your 403(b) plan, you can contribute up to 15 percent of your self-employment income into a SEP, capped at $25,000. The amount of self-employment income on which you can make contributions is your net income after expenses (i.e. your Schedule C net income), reduced by 1/2 of your self-employment income and adjusted for the contribution. This creates an interesting algebraic equation that results in a contribution amount of 13.045 percent of the sum of your Schedule C income less 1/2 your self-employment tax.
Your tax preparer or good tax prep software will do this calculation for you, of course! 
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