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taxgirl1043
New Member

When is best time to contribute to solo 401k?

Hi, I opened a solo 401k as a sole proprietor with no employees. I have some estimates of how much I will be able to contribute for the 2017 employer part, and also for the 2017 employee part (as a sole proprietor I am both). However, I cannot know for sure before I file my 2017 taxes. Should I already contribute  to the 2017 an amount representing a low estimate (and then add more when I process my taxes) or should I not contribute anything yet but  wait until processing my taxes?
1 Best answer

Accepted Solutions
dmertz
Level 15

When is best time to contribute to solo 401k?

In my own case, I make roughly quarterly elective deferrals based on my quarterly net profit, up to the elective deferral limit of $18,000 plus $6,000 catch-up deferral.  I then make by employer contribution as soon as practical after the end of the year when I know the actual amount of my net profit.  Given that retirement investments are made under the assumption that the investments will grow on average, contributing as early as is practical give the investments more time to grow.

Note that to make an elective deferral, you are required to have made the deferral election by the end of the year.  However, the deposit of your elective deferral contribution can be made after the end of the year.  In my case, I make the maximum permissible elective deferral, so I make sure that I have in my 401(k) file forms dated no later than December 31 that total my maximum elective deferral.

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1 Reply
dmertz
Level 15

When is best time to contribute to solo 401k?

In my own case, I make roughly quarterly elective deferrals based on my quarterly net profit, up to the elective deferral limit of $18,000 plus $6,000 catch-up deferral.  I then make by employer contribution as soon as practical after the end of the year when I know the actual amount of my net profit.  Given that retirement investments are made under the assumption that the investments will grow on average, contributing as early as is practical give the investments more time to grow.

Note that to make an elective deferral, you are required to have made the deferral election by the end of the year.  However, the deposit of your elective deferral contribution can be made after the end of the year.  In my case, I make the maximum permissible elective deferral, so I make sure that I have in my 401(k) file forms dated no later than December 31 that total my maximum elective deferral.

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