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If you’re 73 or older and wondering if you can still take advantage of a Solo 401k, we’ve got great news for you! There’s no age limit to open a Solo 401k and start saving for your retirement. In this post, we’ll address common questions and provide examples to help you understand how to make the most of your Solo 401k, no matter your age.
FAQs:
- Can I open a Solo 401k if I’m 73 or older? Yes! As long as you’re self-employed and have no non-owner, non-spouse employees, you can open a Solo 401k at any age.
- What are the contribution limits for someone 73 or older with a Solo 401k? Your contribution limits depend on various factors, including your self-employment income, the type of contribution (employee, employer, after-tax), and whether you’re contributing to another plan. Consult with a financial professional or use online tools to calculate your specific limits.
- Do I need to take Required Minimum Distributions (RMDs) from my Solo 401k if I’m 73 or older? The SECURE 2.0 Act changed the age at which solo 401k owners are required to commence taking RMDs increased to 73 starting January 1, 2023. The prior age to start taking RMDs was 72, resulting in a 1 (one) year to delay taking a mandatory withdrawal of pre tax solo 401k funds. Two important things to think about: If you turned 72 in 2022 or earlier, you will need to continue taking RMDs as scheduled. If you’re turning 72 in 2023 and have already scheduled your withdrawal, you may want to consider updating your withdrawal plan. Good to know: SECURE 2.0 also pushes the age at which RMDs must start to 75 starting in 2033.
- Can I contribute more to my Solo 401k to offset my RMDs? While you can’t make additional contributions specifically to offset RMDs, you can still maximize your contributions up to the annual limits based on your eligibility and self-employment income.
Examples:
Martha, 75, is a freelance writer with $60,000 in net self-employment income. She opens a Solo 401k in 2024 and contributes $16,500 as an employee deferral (including the $6,500 catch-up contribution) and $12,000 as an employer contribution, totaling $28,500. She must also take her RMD by December 31, 2024.
