What Is a Solo 401(k)? Self-Employed Retirement Plans
A solo 401(k) allows self-employed people to save more for retirement. Find out if this tax-advantaged retirement account is right for you.
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Updated · 2 min read
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The perks of self-employment are plenty, but there’s at least one significant drawback: the lack of an employer-sponsored retirement plan like a 401(k).
Enter the solo 401(k), or what the IRS calls a one-participant 401(k). Designed for self-employed workers, a solo 401(k) mimics many of the features of an employer-sponsored plan.
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What is a solo 401(k) plan?
A solo 401(k) is an individual 401(k) designed for a business owner with no employees. In fact, IRS rules say you can’t contribute to a solo 401(k) if you have full-time employees, though you can use the plan to cover both you and your spouse.
Quick facts and who qualifies for a solo 401(k)
Just want the need-to-know basics about this retirement account? Here’s the breakdown:
| Eligibility rules | No age or income restrictions, but must be a business owner with no employees. |
| Contribution limit | $23,500 in 2025. People aged 50 and older can contribute an extra $7,500 as a catch-up contribution. Due to the Secure 2.0 Act, those aged 60, 61, 62 and 63 get a higher catch-up contribution of $11,250. In 2026, the contribution limit is $24,500, with a catch-up contribution of $8,000. Those aged 60, 61, 62, and 63 will have the same higher catch-up contribution of $11,250 |
| Taxes on contributions | Traditional 401(k): Contributions are made pre-tax, reducing taxable income for the year. Roth 401(k): Contributions are made with after-tax dollars. |
| Taxes on qualified distributions in retirement | Traditional 401(k): Qualified distributions are taxed at ordinary income rates. Roth 401(k): Qualified distributions are tax-free. |
| How to open | As long as you have an employer identification number, you can open a solo 401(k) at many online brokers — any of the ones on our list of best brokers for IRAs would also be a good fit for a 401(k). |
Solo 401(k) contribution limits
To understand solo 401(k) contribution rules, you want to think of yourself as two people: an employer (of yourself) and an employee (yes, also of yourself). Even though there is an overall contribution limit, your contributions are subject to additional limits within each specific role.
Solo 401(k) limits for 2025
- The total solo 401(k) contribution limit is up to $70,000 in 2025.
- As the employee, you can contribute up to $23,500, or 100% of compensation, whichever is less, by December 31, 2025. Those 50 or older get to contribute an additional $7,500. People ages 60 to 63 get a higher catch-up contribution of $11,250 due to the Secure 2.0 Act.
- As the employer, you can make an additional profit-sharing contribution of up to 25% of your compensation or net self-employment income. The limit on compensation that can be used to factor your contribution is $350,000 in 2025. These contributions need to be made by the tax filing deadline (April 15, 2026) or extension deadline, if applicable.
Keep in mind that if you’re side-gigging, employee 401(k) limits apply by person, rather than by plan. That means if you’re also participating in a 401(k) at your day job, the limit applies to contributions across all plans, not each individual plan.
Solo 401(k) limits for 2026
- The total solo 401(k) contribution limit is $72,000 in 2026.
- As the employee, you can contribute up to $24,500, or 100% of compensation, whichever is less, by December 31, 2025. Those 50 or older get to contribute an additional $8,000. People ages 60 to 63 get a higher catch-up contribution of $11,250 due to the Secure 2.0 Act.
- As the employer, you can make an additional profit-sharing contribution of up to 25% of your compensation or net self-employment income. The limit on compensation that can be used to factor your contribution is $360,000 in 2026. These contributions need to be made by the tax filing deadline (April 15, 2027) or extension deadline, if applicable.
Is a solo 401(k) tax deductible?
The nice thing about a solo 401(k) is you get to pick your tax advantage: You can opt for the traditional 401(k), under which contributions reduce your income in the year they are made. In that case, distributions in retirement will be taxed as ordinary income. The alternative is the Roth solo 401(k), which offers no initial tax break but allows you to take distributions in retirement tax-free.
In general, a Roth is a better option if you expect your income to be higher in retirement and/or you expect tax brackets to be higher in the future — which experts say is likely. If you think your income will go down in retirement, or you expect tax brackets to remain the same or lower, opt for the tax break today with a traditional 401(k).
Because of these tax perks, the IRS has pretty strict rules about when you can tap the money you put into either type of account: With few exceptions, you’ll pay taxes and penalties on any distributions before age 59 ½.
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Covering your spouse under your solo 401(k)
The IRS allows one exception to the no-employees rule on the solo 401(k): your spouse, if they earn income from your business.
That could effectively double the amount you can contribute as a family, depending on your income. Your spouse would make elective deferrals as your employee, up to the employee contribution limit (plus the 50-and-older catch-up provision, if applicable). As the employer, you can then make the plan’s profit-sharing contribution for your spouse, of up to 25% of compensation.
How to open a solo 401(k)
You can open a solo 401(k) at most online brokers, though you’ll need an employer identification number. The broker will provide a plan adoption agreement for you to complete, as well as an account application. Once you’ve done that, you can set up contributions. You’ll have access to many of the investments offered by your broker, including mutual funds, index funds, exchange-traded funds, individual stocks and bonds.
If you want to make a contribution for this year, you must establish the plan by Dec. 31 and make your employee contribution by the end of the calendar year. You can typically make employer profit-sharing contributions until your tax-filing deadline for the tax year.
Note that once the plan gets going, it may require some additional paperwork — the IRS requires an annual report on Form 5500-SF if your 401(k) plan has $250,000 or more in assets at the end of a given year .
If you need help managing the funds in your solo 401(k), a financial advisor could help you decide what to do.
Here are more resources to help you weigh your options as a self-employed worker:
- Read about the SEP IRA, another good option for solo workers
- Try out our retirement calculator to estimate your savings
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- 1. Internal Revenue Service. Financial Advisors: Are Assets in Your Client’s One-Participant Plans More Than $250,000?. Accessed Nov 15, 2025.
