self employment retirement

Forum|Forum|4 years ago
February 16, 2022
6 replies
54 views

Regarding self employment retirement allowable contribution, what is the difference between maximum deferral and maximum allowable contribution?

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DavidD66

Level 15

Can you clarify your question by providing some context for the use of "deferral" and "contribution"? The two terms are often used interchangeably when discussing retirement plan funding.

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jwdunn333-gmail-comAuthor

Level 2

I'm self-employed. In the section on "Your retirement Contributions" it says "Here are your self-employed retirement deductions using the maximum allowable contribution. Note: The maximum you can defer to all your 401(k) plans is $xxxx, and you can put more into your plan as profit sharing. Maximum Allowed to Qualified plans: $xxxx" I understand the words Maximum Allowed, but it's the part talking about deferring that I don't understand. Thanks.

RobertB4444

Level 15

In this case 'defer' just means 'putting the taxes off until later.' That's what 401k plans do. So it is being used in the exact same context as 'contribution' in this case.

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