A Solo 401(k) — also called an individual 401(k) or one-participant 401(k) — is a retirement savings plan designed specifically for self-employed people and business owners with no full-time employees other than a spouse. It offers the highest contribution limits of any self-employed retirement account, plus the flexibility to choose a traditional or Roth structure. If you run your own business and want to maximize retirement savings, a Solo 401(k) is likely your most powerful option.
Who Qualifies for a Solo 401(k)?
You qualify if you have self-employment income from any source — freelancing, consulting, a side business, or a sole proprietorship — and you have no full-time W-2 employees other than your spouse. If you employ even one non-spouse full-time worker, you cannot use a Solo 401(k) and must consider a SEP IRA or SIMPLE IRA instead. Part-time employees (fewer than 1,000 hours per year) generally do not disqualify you.
Solo 401(k) Contribution Limits for 2026
The Solo 401(k) is unique because you contribute as both an employee and as the employer, allowing significantly higher contributions than other self-employed plans:
- Employee contribution (elective deferral): Up to $23,500 in 2026, or 100% of compensation, whichever is less. If you are age 50 or older, the catch-up contribution limit adds $7,500, for a total of $31,000.
- Employer contribution (profit sharing): Up to 25% of net self-employment income (after deducting the self-employment tax deduction). For a sole proprietor, this is 20% of net Schedule C income.
- Combined limit: $70,000 for 2026 ($77,500 if 50 or older), or 100% of compensation, whichever is less.
Compare this to the SEP IRA, which is capped at 25% of compensation (maximum $70,000 in 2026) but has no employee deferral component. A high-income self-employed person can often contribute significantly more with a Solo 401(k) than a SEP IRA.
Traditional vs. Roth Solo 401(k)
Most Solo 401(k) plans offer both traditional and Roth options for the employee deferral portion:
- Traditional Solo 401(k): Contributions are pre-tax, reducing your taxable income in the year you contribute. Withdrawals in retirement are taxed as ordinary income.
- Roth Solo 401(k): Contributions are after-tax — no deduction now — but qualified withdrawals in retirement are completely tax-free, including all growth. Unlike the Roth IRA, there are no income limits for contributing to a Roth Solo 401(k).
The employer/profit-sharing portion must always go into the traditional (pre-tax) bucket, even if you choose Roth for employee deferrals. Not all Solo 401(k) custodians offer the Roth option — confirm before opening an account.
Solo 401(k) vs. SEP IRA vs. SIMPLE IRA
- Solo 401(k): Highest contribution limits, Roth option available, can take loans against the account, more paperwork. Best for high-income self-employed with no employees.
- SEP IRA: Simpler to set up and administer, no annual filing requirement until assets exceed $250,000, but no catch-up contributions and no Roth option. Good for lower-income self-employed or those who want simplicity.
- SIMPLE IRA: Designed for small businesses with employees; lower contribution limits than Solo 401(k); mandatory employer match. Less suited for solo operators.
How to Open a Solo 401(k)
You must establish a Solo 401(k) plan by December 31 of the tax year you want to make contributions (or by the business’s tax filing deadline if you’re a corporation). However, employee deferrals must be deposited by year-end. Employer/profit-sharing contributions can be made up to the tax filing deadline including extensions.
- Choose a custodian: Fidelity, Vanguard, Charles Schwab, and E*TRADE all offer free Solo 401(k) plans with low-cost index fund investments.
- Complete the plan adoption agreement provided by the custodian.
- Obtain a plan Employer Identification Number (EIN) if you do not already have one for your business.
- Make contributions and keep records of the amounts and dates.
Loan Provision
A Solo 401(k) can include a loan provision that allows you to borrow up to $50,000 or 50% of the account balance, whichever is less. This is a feature not available with IRAs. Loans must be repaid within five years (generally) with interest. The interest goes back into your own account. Loans are not tax events unless you default.
IRS Filing Requirements
Once your Solo 401(k) plan assets exceed $250,000 at the end of any plan year, you must file Form 5500-EZ with the IRS annually. Below that threshold, no annual filing is required. This is simpler than the reporting required for multi-participant 401(k) plans.
Bottom Line
For a self-employed person with no employees, the Solo 401(k) delivers the highest possible contribution limits of any retirement vehicle — up to $70,000 per year in 2026 — combined with the option to shelter income in a Roth structure. Set one up before year-end to maximize current-year contributions.