A solo 401k is available to any self-employed person with no employees (other than a spouse). It allows contributions in two categories: employee contributions and employer contributions.
The combination can produce contribution limits far exceeding any other retirement account, which is why the solo 401k is the best retirement savings vehicle for high-income self-employed workers.
2026 Solo 401k Contribution Limits
| Contribution Type | Limit |
|---|---|
| Employee elective deferral | $23,500 |
| Catch-up (age 50+) | +$7,500 |
| Employer profit-sharing | Up to 25% of net SE income |
| Combined limit (under 50) | $70,000 |
| Combined limit (50+) | $77,500 |
The employer profit-sharing contribution is where the real advantage lies.
Calculating Your Maximum Contribution
Self-employment income is the net profit after business expenses, reduced by half of self-employment tax.
Example: $150,000 in self-employment gross income
| Item | Calculation | Amount |
|---|---|---|
| Gross SE income | $150,000 | |
| Business expenses | -$10,000 | |
| Net SE income | $140,000 | |
| SE tax deduction (50% of SE tax) | $140,000 x 7.65% | -$10,710 |
| Contribution base | $129,290 | |
| Employer contribution (25%) | $129,290 x 25% | $32,323 |
| Employee contribution | $23,500 | |
| Total contribution | $55,823 |
Compare that to:
- Traditional or Roth IRA: $7,000 limit
- SEP-IRA: $32,323 (same as employer portion only)
The solo 401k beats the SEP-IRA by the full employee contribution amount ($23,500).
Solo 401k vs SEP-IRA
| Solo 401k | SEP-IRA | |
|---|---|---|
| Max contribution (low income) | Higher (due to employee deferral) | Lower |
| Max contribution (high income) | Similar | Similar |
| Roth option | Yes | No |
| Loan provision | Yes | No |
| Administrative complexity | Medium | Simple |
| Deadline to establish | December 31 | Tax filing deadline |
For most self-employed workers who want maximum contributions AND a Roth option, the solo 401k wins.
The Roth Solo 401k Option
If your solo 401k plan documents allow it, you can designate employee contributions as Roth (after-tax). The employer profit-sharing contributions must go into the traditional (pre-tax) side.
A Roth solo 401k has no income limits, unlike a Roth IRA. High-income earners who cannot contribute to a Roth IRA directly can use the Roth solo 401k for tax-free growth.
2026 Roth IRA income phase-out (MFJ): $236,000-$246,000
At $300,000 of self-employment income, a Roth IRA is not available. A Roth solo 401k is.
Tax Savings from Maximum Contributions
Self-employed, $150,000 net income, 37% combined tax rate (federal + state + SE):
| Contribution Amount | Estimated Tax Savings |
|---|---|
| $23,500 (employee only) | $8,695 |
| $55,823 (maximum) | $20,655 |
That is $20,655 in taxes saved by maxing the solo 401k instead of paying taxes on that income now. The deduction reduces both income tax and the SE tax deduction adjustment.
How to Set Up a Solo 401k
Major providers offering solo 401k plans with low or no fees:
- Fidelity: No fees, does not offer Roth solo 401k currently
- Vanguard: Annual fee structure
- Charles Schwab: No fees, Roth option available
- E*TRADE: No fees, Roth option available
The plan must be established by December 31 to make contributions for the current year. Contributions themselves can be made up to your tax filing deadline including extensions.
See Best Investing Platforms for current solo 401k provider comparison.
Use the CalcMoney 401k Analyzer to project your solo 401k balance over time and model different contribution scenarios.
Frequently Asked Questions
Can my spouse contribute to a solo 401k?
Yes. If your spouse does any work for your business (even part-time), they can receive compensation and contribute to the same solo 401k plan. This doubles the potential employee contribution from $23,500 to $47,000.
What happens if I hire employees?
Once you hire a full-time employee (other than a spouse), you lose solo 401k eligibility. The plan must be converted to a standard 401k plan, which has significantly higher administrative costs and requires employer matching for employees. Some business owners keep solo 401k plans in a separate business entity for this reason.
Can I have a solo 401k and a W-2 job simultaneously?
Yes. Your employee contribution limit ($23,500) is shared across all plans. If you contribute $15,000 to your employer's 401k, you can only contribute $8,500 as employee deferral to the solo 401k. The employer profit-sharing side is separate and not affected.
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