2021 Solo 401(k) Contribution Deadline

Author: Siân Killingsworth / 22 Mar 2021 / Business

Did you know it’s not too late to set up and make contributions to a Solo 401(k) for 2020?

Previously, in the years prior to 2020, you would’ve had to get your account established by December 31, but the SECURE Act gives solopreneurs until the business tax deadline, April 15, 2021, to sign up for a Solo 401(k) and start saving for retirement. You may also request an extension to the 2020 Solo 401(k) contribution deadline to get even more time to make your contributions for the year.

What Are the Solo 401(k) Deadlines for 2021?

• Single LLC and C Corps have until April 15, 2022, to set up and contribute to a Solo 401(k) for 2021.
  Please note: If a plan is adopted in 2022 for 2021 you cannot make pre-tax or Roth deferrals, but you can still make after-tax and employer contributions.
• Partnership LLC and S Corps have until March 15, 2022, to set up and contribute to a Solo 401(k).
• If you request and receive an extension, you may have until September or October 15, 2022, or until you file your taxes.

What Are the Solo 401(k) Contribution Limits for 2021?

• As an employee, you may contribute up to 100% of your wages to your Solo 401(k), to the maximum.
• The maximum Solo 401(k) contribution limit for employees is $19,500 in 2021.
• If you’re over 50, you may contribute an additional $6,500.
• As employer, you can reserve up to 25% of the business entity’s income, to the maximum.
• The maximum limit for total employee/employer contributions is $58,000 in 2021.
• If your spouse works for the business, the same allowances may be made on his or her behalf.

Should You Explore Solo 401(k) Plans in 2021?

Solo 401(k) plans offer many benefits over other types of retirement savings vehicles – particularly with the high limits of contributing as both “employer” and “employee.” The ability to choose between traditional and Roth plan types is another benefit, allowing you to choose to pay taxes on the amount invested now and enjoy a tax-free retirement, or skip on paying taxes now and allow your money to compound. If you experience financial hardship, you have the freedom to borrow from your Solo 401(k) if necessary – a key difference between a Solo 401(k) and a SEP IRA.

Opening a Solo 401(k) is easy. Online plan administrator Ubiquity will set you up in no time. If desired, you can rollover money from other accounts or set up automatic transfers from your checking, savings, or payroll accounts. If you’re interested in setting up a Solo 401(k), contact Ubiquity to establish a low-cost plan in minutes.