What is a Solo 401(k)?

A Solo 401(k) (also called an individual 401(k) or self-employed 401(k)) is a retirement plan for a self-employed person or business owner with no employees other than a spouse. Because you’re both the employee and the employer, you can contribute in both roles, which pushes the total contribution limit well above what an IRA allows.

That dual role is the whole appeal. A traditional employee at a company can only defer part of their salary into a workplace 401(k). When you own the business, you also make the employer contribution, so a large share of your self-employment income can go into a single tax-advantaged account.

Who Qualifies for a Solo 401(k)?

You need self-employment income and no full-time employees other than yourself and, if applicable, a working spouse. That covers freelancers, consultants, sole proprietors, independent contractors, and single-member owners of an LLC or S corporation.

The moment you hire a non-spouse employee who works enough hours to be eligible, the plan generally has to include them, and it stops being a Solo 401(k) in the true sense. A spouse who earns income from the business is the one exception, and they can participate under the same plan, effectively doubling the household contribution room.

How Much Can You Contribute to a Solo 401(k) in 2026?

Your contributions come in two parts:

• Employee contribution. As the employee, you can defer up to $24,500 in 2026, or 100% of your compensation, whichever is less. If you’re 50 or older, you can add an $8,000 catch-up contribution.
• Employer contribution. As the employer, you can add a profit-sharing contribution of up to 25% of your compensation.

Added together, total contributions can’t exceed $72,000 in 2026, or $80,000 if you’re 50 or older once the catch-up is included. A separate compensation limit caps the pay used in these calculations at $360,000.

One nuance for the self-employed: for a sole proprietor, the 25% employer contribution is calculated on net self-employment income after subtracting the deductible portion of self-employment tax and the contribution itself, which works out closer to 20% of net profit in practice. Owners paid a W-2 salary through an S corporation calculate the 25% on that salary directly.

A Worked Example

Take a freelance consultant with $140,000 of W-2 compensation in 2026 who is under 50. As the employee, they defer the full $24,500. As the employer, they add 25% of $140,000, or $35,000. That’s $59,500 into the plan for the year, well under the $72,000 ceiling and far beyond any IRA’s limit.

To hit the full $72,000, they’d need roughly $190,000 in compensation, since the employer piece is capped at 25%. Higher earners reach the ceiling; lower earners are limited by the 25% employer math rather than the headline number.

Roth vs. Traditional Solo 401(k)

Most providers let you split each dollar between traditional and Roth treatment. Traditional contributions are pre-tax, lowering your taxable income now, with withdrawals taxed in retirement. Roth contributions are made with after-tax income and grow tax-free, so qualified withdrawals aren’t taxed later.

The employee portion can go either way. The employer profit-sharing portion has historically been traditional (pre-tax) only, though recent rule changes allow Roth employer contributions if your plan document permits it, so it’s worth confirming what your specific provider supports before counting on it.

Setting Up a Solo 401(k)

Opening a plan means choosing a provider (major brokerages like Fidelity, Vanguard, Schwab, and E-Trade all offer them), getting an Employer Identification Number (EIN) from the IRS if you don’t already have one, and completing the plan’s adoption paperwork. The plan generally needs to be established by the end of the tax year to make employee deferrals for that year, while employer contributions can be made up until your tax filing deadline, including extensions.

If you want to see how maxing out a Solo 401(k) changes your retirement timeline and tax picture, you can model the contributions in ProjectionLab and compare traditional versus Roth treatment side by side.

Frequently Asked Questions

How much can I contribute to a Solo 401(k) in 2026? Up to $72,000 total, combining a $24,500 employee deferral with an employer profit-sharing contribution of up to 25% of compensation. If you’re 50 or older, an $8,000 catch-up raises your ceiling to $80,000. The pay used in the calculation is capped at $360,000.

Solo 401(k) vs. SEP IRA: which is better? Both let the self-employed save far more than a regular IRA, but a Solo 401(k) usually allows a larger contribution at the same income because it adds the employee deferral on top of the employer piece. A SEP IRA is limited to the employer contribution alone (the lesser of 25% of compensation or $72,000 for 2026), with no separate deferral and no catch-up. A SEP IRA is simpler to administer, while a Solo 401(k) adds Roth options and, at some providers, loans. If you have no employees and want to contribute the maximum, the Solo 401(k) typically wins.

Can I have a Solo 401(k) and a regular 401(k) at the same time? Yes, but the $24,500 employee deferral limit is per person, not per plan, so it’s shared across both. If you max out the deferral at your day job, you can’t defer more as an employee in your Solo 401(k). You can still make the employer profit-sharing contribution from your self-employment income, subject to the overall $72,000 per-plan limit.

What is the contribution deadline for a Solo 401(k)? The plan generally must be established by December 31 to make employee deferrals for that tax year. Employer profit-sharing contributions can be made up until your tax filing deadline, including extensions, which for many self-employed filers is in October of the following year.