Blog Posts, Financial Planning, Investment Planning

What are the Contribution Limits for Individual 401(k)s for 2020?

The most that you can contribute as a self-employed person in your Individual 401(k) in 2020 is $57,000 if you are under 50 years old. If you are over 50 years old, the amount increases to $63,500.

Individual 401(k) contributions are made up two parts; an employee contribution and an employer contribution. The maximum employee contribution for 2020 is $19,500 if you are under 50 years old and $26,000 if over 50 years old (this can be up to 100% of your self-employment income).  The maximum employer contribution for 2020 is 20% of your net self-employment income up to the total limit of $37,500.

An Individual 401(k) is also called an i401(k), Solo 401(k), One-Participant 401(k) or a Self-Employed 401(k).

What is the Deadline for Individual 401(k) Contributions?

An Individual 401(k) plan must be adopted by the last day of the tax year for which the self-employed person makes employer and employee contributions. Additionally, the self-employed individual must elect to make his or her employee deferral contribution by 12/31. However, the actual contribution must be made by the tax deadline for the year.

Learn more about the tax advantages of Individual 401(k) accounts.

Learn more about small business and self-employed retirement plans.

If you have comments, please feel free to send us a message.

This article was written by Shoreline Financial Advisors. To learn more about us, please visit our website.

The information contained on this Website is not intended as, and shall not be understood or construed as, financial, tax, or professional advice. The information contained on this Website is not a substitute for any advice from a professional who is aware of the facts and circumstances of your individual situation.

We have done our best to ensure that the information provided on this Website and the resources available for download are accurate. Regardless of anything to the contrary, nothing available on or through this Website should be understood as a recommendation.  Neither the Company nor any of its employees or owners shall be held liable or responsible for any errors or omissions on this website.

Leave a Reply