A Solo 401(k), also known as an Individual 401(k), is a retirement plan designed for self-employed individuals or business owners with no full-time employees. It offers the highest contribution limits of any defined contribution plan.

2025 Contribution Limits

• Employee Elective Deferral: $23,500 ($31,000 if 50 or older)
• Employer Profit Sharing: Up to 25% of compensation (S-Corp) or 20% of self-employment income
• Total Annual Limit: $70,000 ($77,500 if 50 or older)
• Compensation Limit: $350,000

Key Advantages

• Highest contribution limits for self-employed
• Both employee and employer contributions
• Roth option available for employee deferrals
• Loan provisions (if plan allows)
• Spouse can also participate if employed by business
• Mega backdoor Roth potential

Business Structure Considerations

• Sole Proprietor/LLC: 20% of net self-employment income for employer contribution
• S-Corporation: 25% of W-2 wages for employer contribution (optimize salary vs distributions)
• Partnership: Based on guaranteed payments and self-employment income

Important Rules

• Cannot have full-time employees (except spouse)
• Must establish by December 31 (or fiscal year-end)
• Employer contributions can be made until tax filing deadline
• Subject to IRS nondiscrimination testing if employees added
• Required minimum distributions at age 73 (SECURE Act 2.0)