Solo 401(k) Plans - Save Up to $70,000 Tax-Deferred Each Year
Solo 401(k) plans allow self-employed business owners to increase their retirement savings contributions versus an IRA. Additionally, Solo 401(k) plans offer tax advantages that may result in a lower tax bracket.
What is a Solo 401(k)?
A solo 401(k) (also known as an individual 401k) is a retirement plan for self-employed business owners and their spouses. This type of retirement plan allows you to contribute to the plan as both the employer and employee, providing you with the ability to maximize contributions and business deductions, while lowering your personal taxes.
You can also choose to contribute as an employee to the Roth 401(k) feature no matter how much you earn and also have access to your money via loan without penalty in case of an emergency.
As you can see, Solo 401(k)s offer some significant advantages over Traditional IRAs:
| Solo 401(k) | Traditional IRA | ||
|---|---|---|---|
| Annual Limit per Individual | Solo 401(k)
$70,000
| Traditional IRA
$7,000
| |
| Age 50+ Catch-up amount | Solo 401(k)
$7,500
| Traditional IRA
$1,000
| |
| Roth Income Limit | Solo 401(k)
None
| Traditional IRA
$150K*
| |
| Penalty-free Access | Solo 401(k)
Yes, via 401(k) loan1 | Traditional IRA
No
| |
*In 2025, the contribution amount allowed begins to decrease at $150K for single individuals, hitting $0 at $165K. For those filing jointly, the contribution limit begins to decrease at $236K, hitting $0 at $246K.
1Loan balances must be paid off in five years and if you leave your job, you may be required to pay back the full balance within a short-time frame or pay penalties and taxes. Most important, borrowing from your 401(k) can significantly reduce your retirement savings.
How the Self-Employed Can Save $10,000+ in Taxes This Year with a Solo 401(k)
The amount you can tax-defer will vary by your earnings and your tax rate. In general, for those earning $160,000 or more, protecting $10K or more in taxes is often doable. For those earning less, the tax savings can still be quite substantial. Here’s a hypothetical example of how an owner under 50 years of age can make contributions to a Solo 401(k) and lower taxable income:
| Sole Proprietor Under 50 Years of Age | 401(k) | ||
|---|---|---|---|
| Earnings | 401(k) $160,000 | ||
| Contributions made as an employee | 401(k)
$23,500
| ||
| 20% of net self-employment contribution | 401(k)
$32,000
| ||
| Total Tax-Deferred Savings | 401(k) $55,500 | ||
| Taxable Income | 401(k) $104,500 |
While the owner earned $160,000, only $104,500 is taxable by the federal government. Assuming an effective tax rate of 20 percent, that’s $11,100 she can now keep for herself versus paying the taxman this year (160,000 x 0.2 = $32,000; 104,500 x 0.2 = $20,900; $32,000 - $20,900 = $11,100 in tax savings). In actuality, the tax savings could be even greater as she may also drop a tax bracket/AGI by contributing. This is not meant as tax advice. Please consult a tax advisor to discuss your specific situation.
Note, owners that are 50 years of age or more could tax-defer up to $77,500 in earnings this calendar year depending on your earnings. If your company is established as a corporation, you may be able to deduct 25% of W-2 earnings.
Learn More About the Benefits of a Solo 401(k) Plan for Your Business Here:
Solo 401(k) Features and Insights
Whether you need a simple and powerful retirement saving plan for one person or the full suite of features a 401(k) offers for one or more owners, we’ve got you covered. ShareBuilder 401k presents the Solo 401(k) Saver and the Solo 401(k) Plus for owner-only businesses. Pricing and features vary, but the same low-expense approach to investing, exceptional service, and big 401(k) benefits come with every plan.
| Highlights | Solo 401(k) Saver | Solo 401(k) Plus | |
|---|---|---|---|
Number of Owners Supported
| Solo 401(k) Saver
1
| Solo 401(k) Plus
1 to 19 owners, and spouses can be included
| |
Toll-Free Access to ShareBuilder 401k Advisors and Service
Teams
| Solo 401(k) Saver
Yes
| Solo 401(k) Plus
Yes
| |
Roth 401(k) Feature
| Solo 401(k) Saver
Coming Soon
| Solo 401(k) Plus
Yes
| |
401(k) Loan Option
| Solo 401(k) Saver
No
| Solo 401(k) Plus
Yes
| |
One-time Setup
| Solo 401(k) Saver
Starts at $50 / Refunded with a $6K contribution
| Solo 401(k) Plus
Starts at $150
| |
Account Service
| Solo 401(k) Saver
Starts at $8/mo.
| Solo 401(k) Plus
Starts at $25/mo.
| |
Transaction / Trading Fees / Commissions
| Solo 401(k) Saver
None
| Solo 401(k) Plus
None
| |
Account Minimum
| Solo 401(k) Saver
$100
| Solo 401(k) Plus
$0
| |
Automatic Price Discounts as Your Assets Grow
| Solo 401(k) Saver
Yes
| Solo 401(k) Plus
Yes
| |
Option to build your own portfolio from our 22 ETFs and one money market of retirement appropriate investments.
| Solo 401(k) Saver
Coming Soon
| Solo 401(k) Plus
Yes
| |
Choose one of our six diversified model portfolios built by experts using low-expense exchange-traded funds (ETFs).
| Solo 401(k) Saver
Yes
| Solo 401(k) Plus
Yes
| |
Statements & 1099R
| Solo 401(k) Saver
Yes
| Solo 401(k) Plus
Yes
| |
Signature-Ready Form 5500
| Solo 401(k) Saver
No
| Solo 401(k) Plus
Yes (required at $250K in your plan balance)
| |
Administration & Recordkeeping
| Solo 401(k) Saver
Self-Managed
| Solo 401(k) Plus
Fully Administered
| |
There is an ongoing price per month to support the Solo 401(k) Saver plan until your balance reaches $25,000. For those with a Solo 401(k) Plus, the monthly support cost will lower at $25,000 and decreases at other milestones and will be fully waived when your plan exceeds $250,000. Setup and account service costs can be more than offset by the tax benefits for those regularly contributing to their account and are typically tax deductible for your business too.*
The ShareBuilder Advisors Investment Committee screens from the thousands of investments out there to determine the investment line-up from which you will select. Solo 401(k) Plus clients may choose freely from the 23 funds and 6 model portfolios to build savings for retirement. Solo 401(k) Saver clients may select from the 6 model portfolios that range from Stable to Aggressive and meet most any risk and/or time horizon needs. ShareBuilder 401k charges an investment management expense for servicing your plan and works to keep all-in fund and investment management expenses well under 1%.
Solo 401(k) Fun Facts
Self-employed, multiple-owner firms without employees, and/or spouses that will contribute more than {{iraContributionLimit}} per year.
Any business with employees that have either:
Reached the age 21 and/or
Worked 1,000 or more hours in the year.
Solo 401(k) plans can be amended and upgraded to an employee-based plan in the event you add employees.
Tip: If you, other owner, or a spouse in this plan owns another business(es), you may have to cover all these employees in a plan and would need to open a different plan type.
A new Solo 401(k) plan must be established by the end of your business tax year (generally December 31st) to qualify for the current year saving and tax benefits.
Contributions as an employee (Roth, catch-up, regular), must be made within the business tax year.
Employer contributions (profit share) you make, can be made by your tax deadline for the previous year (April 15th for most)
You can contribute as both employer and employee. This enables you to receive tax-deductions on employer contributions and pretax elective deferral contributions as the employee.
You receive the potential for tax-deferred growth on employer and employee contributions. Note that with Solo 401(k) Plus, employee elective deferrals may also be made as Roth contributions, with any earnings tax-free in retirement.
Because a Solo 401(k) is a type of 401(k) plan, it follows traditional 401(k) rollover and transfer rules. When consolidating your old 401(k) or qualified IRA account to your ShareBuilder 401k, the assets need to be moved via transfer and not as a distribution/rollover. This can take several weeks or more.
If you withdraw money from your 401(k) account other than via a 401(k) loan, your withdrawal will typically be subject to a 10% tax penalty if you are under 59 ½ years of age.
The Solo 401(k) Plus allows for 401(k) loans. If you take a loan and you then terminate your plan before you pay it back, the outstanding balance will be treated as an early withdrawal and subject to a 10% tax penalty if you are under 59 ½ years of age. Know that 401(k) loan limits in a 401(k) are 50% of your vested balance up to $50,000.
* ShareBuilder 401k does not offer tax or legal advice. Consult with your tax or legal advisor before engaging in specific strategies.