Can You Contribute to a 401k Without Being Employed?

Shawn Plummer

CEO, The Annuity Expert

Contributing to a Solo 401k as a Self-Employed Individual

  • Eligibility: If you are self-employed with no employees, you can contribute to a Solo 401k.
  • Advantages: Solo 401ks allow both employee and employer contributions, essentially letting you contribute twice: as the employee and as the employer.

Alternative: Flexible Premium Deferred Annuity

  • What is it?: For those not eligible for a Solo 401k, a flexible premium deferred annuity is an option.
  • Benefits: These annuities offer premium bonuses that can mimic 401k employer contributions, providing additional value.
  • Tax Advantage: The deferred annuity is nonqualified, meaning only the interest earned is taxable. In contrast, with a 401k, the entire withdrawal amount is taxable.

Plan your post-retirement life better by using our Annuity Payout Calculator to estimate your income.

Comparison of Solo 401k and Flexible Premium Deferred Annuity

FeatureSolo 401kFlexible Premium Deferred Annuity
EligibilitySelf-employed without employeesAvailable to anyone
ContributionsEmployee and employer contributionsPremium payments, with bonus options
Tax on WithdrawalsTaxed on the entire amountOnly interest earned is taxed
Mimics Employer MatchDirect employer contributions possiblePremium bonuses mimic employer match
Investment OptionsBroad range of investment choicesDepends on the annuity provider

Conclusion

Whether you opt for a Solo 401k or a flexible premium deferred annuity depends on your employment status and financial goals. Solo 401ks are ideal for self-employed individuals, offering robust contribution limits and tax benefits. For others, deferred annuities provide a flexible alternative with unique tax advantages and potential bonus features. Both options support long-term financial planning and retirement savings. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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