Solo 401k funding, payroll tax tradeoff of single member LLC

[Leland S.]

Looking for some second opinions on anyone who is "self employed" and has a Solo 401k. Probably folks here know about check book 401k's and such to invest in real estate. 

I am now in a contract position as 1099 and have the option to fund my own Solo 401k up to 55k, which is amazingly awesome compared to most employers just providing the individual limit. 

The gotchya is that they limit employer funding to 25% of the income, which means, to meet the 55k limit you have to exceed the FICA income limit (go figure) and pay maximum payroll taxes. 

I did a spreadsheet calculation of the difference between paying myself 80k (and funding 25% to 401k to make 100k income) (the low end of a reasonable salary for my job) and the salary to achieve maximum funding of 55k (146k). So assuming the business is making net at least 146k, how much is the difference when you adjust the salary across income tax to owner distribution at the 21% rate. 

The result is below. It shows I gain $16,500 in my 401k at the cost of $8569 to the tax man. I really don't think this is that bad. It means I get almost twice the amount of tax protected money per tax dollar handed over. (My Tax state is Arizona).

Then I assumed a return on investment of 12%. So for each dollar saved in taxes by not increasing salary, I assumed earned 12% starting year 1, reinvesting each year those earnings, and the same on the 401k money. 

The result there is that the 401k additional funds can become $120k value in 5 year at 12% return, just interest is 37.5k. The cash saved by not contributing to 401k can only become 62k (and that is without the capital gains taxes considered).  

So by paying the full amount to fund the 401k you end up with extra 18k of interest that is tax free in your retirement account compared to having the cash. Even at 5% ROI, it still appears better.

What do you guys think? 

ROI Expected	12%
401k delta	$ 16,500
Income Forfeited	$ 8,569	Income Int (Cash)	Delta (401k - Cash)	Per Year
5 yr interest	$ 37,459 (401k)	$ 19,454	$ 18,006	$ 3,601
5 yr value	$ 119,959 (401k)	$ 62,299	$ 57,661	$ 11,532

ROI Expected	5%
401k delta	$ 16,500
Income Forfeited	$ 8,569	Income Int	Delta	Per Year
5 yr interest	$ 13,591	$ 7,058	$ 6,533	$ 1,307
5 yr value	$ 96,091	$ 49,903	$ 46,188	$ 9,238