Solo 401(k) Contribution Deadlines: What You Need To Know

Shawn Plummer

CEO, The Annuity Expert

The solo 401(k) contribution deadline is an important date for solo entrepreneurs. This article will discuss how the solo 401(k) contribution deadline works and when it falls, as well as what solo entrepreneurs need to know about solo 401(k)s and their contributions. We’ll also explore some of the benefits of a solo 401(k).

If you’re a solo entrepreneur or run your own business, this is one date that you want to mark on your calendar!

Solo 401(k) Contribution Deadlines

The solo 401(k) contribution deadline for employees is December 31, 2021. Employer profit-sharing contributions are generally accepted until your tax-filing deadline for the tax year.

What is a solo 401(k) plan?

A solo 401(k) is a type of 401(k) for small business employers who have no employees.

Solo 401(k) contribution limits

In 2021, the maximum amount that you can contribute to a solo 401(k) is $58,000. In 2022, it will be $61,000. There is also a catch-up provision of $6,500 for those aged 50 and above.

Max Contributions

Contribution Type20212022
As Employee$19,500$20,500
Over age 50Additional $6,500Additional $6,500
As EmployerUp to 25% of CompensationUp to 25% of Compensation
Total Contribution$58,000 MAX$61,000 MAX

Solo 401(k) Contribution Limits For A Spouse

The IRS allows one exception to the no-employees rule. If your spouse earns income from your business, you can let them be an employee and put money into a solo 401(k).

Contribution Type20212022
Spousal Employee$19,500$20,500
Over age 50Additional $6,500Additional $6,500
The EmployerUp to 25% of CompensationUp to 25% of Compensation
Total Contribution$58,000 MAX$61,000 MAX

Reasons To Contribute To An Annuity Rather Than a Solo 401(k)

Annuities are flexible investment products that can help you achieve your long-term financial goals and provide a source of retirement income in the future. Tax deferral alone is not a sufficient reason to use an annuity in a tax-qualified plan. But income options, death benefit protection, investment selections and services, and flexibility are benefits an annuity can bring to any solo 401(k).

Tax-Deferral

Like a solo 401(k), you won’t pay any taxes on gains from the annuity until you withdraw your money. With that said, you want to set up a non-qualified annuity that is funded with post-tax money. When you retire, only the interest you earn will be taxed (instead of the entire amount) as you withdraw the income monthly or annually.

Growth potential

You can earn additional interest based on the upward movement of an external market index in both bull and bear markets.

Protection from market downturns

In a fixed annuity or fixed index annuity, you will not lose money due to market downturns. If the markets have a down year, you earn zero interest. In exchange for this protection, you are limited on the upside you can get each year, unlike an individual stock through a mutual fund.

variable annuity will provide unlimited upside potential with no protection from volatile market conditions. However, adding a Guaranteed Lifetime Withdrawal Benefit can protect the annuitant from running out of money due to a stock market crash.

Guaranteed retirement income for life

You can choose to annuitize your annuity to receive annuity payments over a period of time or for life or add an optional income rider to generate a paycheck you can never outlive. Sometimes the insurance company will provide a paycheck that increases to help with inflation and the cost of living.

Flexibility

In addition to an income for life, waivers of surrender charges are often included to offer accessibility to your retirement plan in case of emergencies like entering a nursing home or terminal illness. In addition, there are no limits on annual contributions to an annuity.

Estate planning

With most fixed indexed annuities, your beneficiaries are guaranteed to receive your annuity’s Accumulation Value or Minimum Guaranteed Value, whichever is greater.

Contribution match

Like a contribution 401(k) match, some annuities can offer a premium bonus (up to 15%) on rollovers and additional deposits.

Solo 401(K) Vs. Annuity: A Comparison

AnnuitySolo 401(k)
No Contribution LimitsLimited Contributions
Insurance or Investment ProductsInvestment Products
Guarantee on InvestmentNo Guarantee on Investment
Tax-Deferred or Tax-Free GrowthTax-Deferred Growth
Pass Down to BeneficiariesPass Down to Beneficiaries
Spousal ContinuanceSpousal Continuance
Market Volatility ProtectionCould Lose Money
Guaranteed lifetime IncomeCould Run Out of Money

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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