Even though 2022 has already begun, it’s not too late to set up and make contributions to a Solo 401(k) for 2021.
The 2021 Solo 401(k) contribution deadline is the corporate tax return deadline of April 18, 2022. You may have even more time if you choose to file a corporate tax extension.
Please note that if you started your plan AFTER December 31, 2021, you won’t be able to make salary deferrals and your contributions will be limited to employer contributions. If this is the case, the maximum 2021 contribution for a new solo plan could be up to $58,000.
As for this year, the SECURE Act allows entrepreneurs and the self-employed to set up a plan as late as April 15, 2023, to meet the 2022 Solo 401(k) deadline.
What Are the Traditional Solo 401(k) Deadlines for 2022?
The precise Solo 401(k) deadlines depend upon how your business is structured:
- For a Single LLC or C Corp: you have until April 17, 2023, to set up and contribute to a Solo 401(k) plan for 2022
- For a Partnership LLC or S Corp: You have until March 15, 2023, to set up and contribute to a Solo 401(k) plan for 2022
- If you request and receive a tax extension: you may have until as late as September or October 16, 2023, to establish your plan and contribute
What Are the Roth Solo 401(k) Deadlines for 2022?
There is one caveat about the extended deadlines for 401(k)s: they only apply to traditional after-tax 401(k)s. If you want to adopt a Roth 401(k) plan so that you can make pre-tax deferrals and pay no tax on the money when you take distributions in retirement, you will need to set up the plan and make all contributions by December 31, 2022.
What Are the Solo 401(k) Contribution Limits for 2022?
It’s a great year to start saving for retirement if you haven’t already, as the limits recently increased:
- Solo 401(k) participants may contribute to their retirement plans as both “employee” and “employer”
- As the “employee,” you may contribute up to 100% of your wages to a Solo 401(k) account if you choose
- $20,500 is the maximum 2022 Solo 401(k) contribution limit for employees (up by $1,000 over 2021)
- Employees age 50 and older may put in another $6,500 on top of this limit in “catch up contributions”
- As the “employer,” you may reserve up to 25% of the business entity’s income to your 401(k)
- The total employer/employee maximum in 2022 is $61,000 (up $3,000 from 2021)
- If your spouse works for the business, the same allowances can be made on their behalf
Is a Solo 401(k) Plan Worth It in 2022?
A Roth Solo 401(k) lets self-employed entrepreneurs pay taxes up front to avoid paying taxes upon withdrawal in retirement. Plus, all income and gains earned from the 401(k) plan are tax-free. You’ll never have to pay tax on the money you take out during retirement because you’ve already paid it. This can be a great way to pass money on to your heirs.
Opening a Solo 401(k) plan is quick, easy, and affordable with Ubiquity. Unlike other companies, we administer your plan for one low, flat monthly rate, with no additional fees. You are free to work with a broker of your choice or choose your own investments.
If desired, you may roll over money from other accounts or set up automatic transfers to put your retirement account on autopilot.
Contact Ubiquity to take a step toward future financial freedom.
