What's the advantage of a Solo 401(k) over a SEP IRA?

Solo 401(k) lets you contribute as both employee AND employer, potentially reaching $72,000 faster on lower income. You can also take loans from a Solo 401(k), choose Roth contributions, and make catch-up contributions if 50+. SEP IRA is simpler to set up but less flexible.

Can my spouse participate?

Yes - if your spouse works in your business, they can make their own employee contributions plus receive employer contributions. This could double your household's total retirement contributions.

When do I need to set up a Solo 401(k)?

The plan must be established by December 31 of the tax year. However, you have until your tax filing deadline (including extensions) to actually make contributions for that year.

Can I have a Solo 401(k) and a regular 401(k) at my day job?

Yes, but your total employee contributions across ALL 401(k) plans are limited to $24,500 (2026). The employer contribution side of your Solo 401(k) is separate and not affected by your day job contributions.

What if I hire employees later?

Once you have full-time employees (other than your spouse), you may need to convert to a regular 401(k) and cover eligible employees. Plan for this transition if you expect to grow.

Business Owner

Solo 401(k)

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intermediate · $50K - $100K

For self-employed with no employees (except spouse).

Contribute as both employee ($24,500) AND employer (25% of net earnings).

Total up to $72,000/year in 2026.

Can borrow from it unlike SEP IRA.

Roth option available.

Annual Limit

$72,000 ($80,000 if 50+, $83,250 if 60-63) - 2026

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Tax Benefit

Shelter $47,500-$72,000+ annually from taxes

Requirements

Self-employment income
No full-time employees (except spouse)
Must establish by December 31 of tax year

How to Implement

1Open a Solo 401(k) at a brokerage that offers one
2Contribute employee portion ($24,500 in 2026)
3Calculate and contribute employer portion (20-25% of net income)
4File Form 5500-EZ if balance exceeds $250,000
5Consider Roth option for tax-free growth

Frequently Asked Questions

Annual Limit

$72,000 ($80,000 if 50+, $83,250 if 60-63) - 2026

Featured Providers

Fidelity
Vanguard
Schwab

Educational Only: This information is for educational purposes. Consult a qualified financial advisor or tax professional before implementing.

Last reviewed: April 2026

Related business owner strategies

SEP IRASelf-employed? Contribute up to 25% of income (max $72,000) with simple setup.SIMPLE IRASmall business with employees? Easy retirement plan with required matching.Qualified Business Income (QBI) DeductionPass-through business owners can deduct up to 20% of qualified business income.

Sources

Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits

Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.

Solo 401(k)

Interactive Calculator

Tax Benefit

Requirements

How to Implement

Frequently Asked Questions

What's the advantage of a Solo 401(k) over a SEP IRA?

Can my spouse participate?

When do I need to set up a Solo 401(k)?

Can I have a Solo 401(k) and a regular 401(k) at my day job?

What if I hire employees later?

Annual Limit

Featured Providers

Related business owner strategies

Sources