Retirement Contributions Before Year-End

Deadlines at a glance

• 401(k) employee deferrals — must be withheld from a paycheck dated on or before 12/31
• Solo 401(k) — plan must be established by 12/31; employee deferrals follow the 401(k) rule; employer profit sharing can fund by the tax filing deadline (with extension)
• SEP-IRA — contributions can fund by the extended return due date
• SIMPLE IRA — plan must already be set up; contributions through 1/30 for sole prop, payroll cycle for others
• Traditional & Roth IRA — contributions accepted through the April filing date
• HSA — through the April filing date
• Defined benefit plan — must be established by 12/31; funding by the extended return date

Contribution limits to plan around

Limits adjust each year for inflation. Confirm the current year's numbers with the IRS before you contribute — over-contributing creates excise tax and amendment work.

• 401(k) / Solo 401(k) employee deferral cap (plus catch-up if age 50+)
• Total 401(k) limit (employee + employer) — the Solo 401(k)'s big advantage for owner-only businesses
• SEP-IRA limit — 25% of compensation up to the annual cap
• IRA limit — much smaller; income phase-outs apply for Roth and for deductibility of Traditional
• HSA limit — self-only vs. family coverage

Strategy by entity type

• Sole prop / single-member LLC — Solo 401(k) usually wins on contribution capacity
• S-Corp with owner-only payroll — Solo 401(k) calculated off W-2 wages, not distributions
• S-Corp with non-owner employees — Solo 401(k) is out; consider Safe Harbor 401(k) or SIMPLE
• High-income, age 50+ owners — defined benefit / cash balance plan can allow six-figure contributions

Common year-end mistakes

• Trying to open a Solo 401(k) in January for the prior year (the plan itself must exist by 12/31)
• Funding an employer SEP based on distributions instead of W-2 wages (S-Corp)
• Skipping catch-up contributions if age 50+
• Forgetting Roth conversions are taxable income — model the tax before converting