A Solo 401(k) is a powerful retirement plan designed for self-employed individuals and small business owners with no employees. Learn how it works and how to maximize your tax savings. Want to explore Solo 401(k) quickly? Click the button below!
What is a Solo 401(k)?
A Solo 401(k), also known as an Individual 401(k), Self-Employed 401(k), or Owner-Only 401(k), is a retirement plan that offers the same tax advantages as a traditional 401(k) but is designed specifically for self-employed individuals. Despite its name, your spouse can also be included if they work with you in the business.
Who is Eligible for a Solo 401(k)?
To qualify for a Solo 401(k), you must:
- Be a self-employed individual or small business owner with no full-time employees
- Your spouse can be included if they work in the business
Solo 401(k) Contribution Limits for 2024
- Employee Deferral: Up to $23,000 or 100% of compensation (whichever is less)
- Employer Contribution (Profit Sharing): Up to 25% of compensation
- Catch-Up Contribution (Age 50+): Additional $7,500
With a working spouse, total contribution can reach up to $138,000 (or $153,000 with catch-up contributions).
Key Benefits of Solo 401(k)
1. High Contribution Limits: Allows higher savings than most retirement plans.
2. Traditional or Roth Option: Choose tax deduction now or tax-free withdrawals later.
3. Spouse Inclusion: Maximize family retirement savings.
4. Mega Backdoor Roth Strategy: Ideal for high-income earners wanting additional Roth contributions.
Conclusion
Solo 401(k) is one of the most powerful retirement tools available for self-employed individuals. Its high contribution limits, tax flexibility, and spousal inclusion make it a must-have plan. Start planning your retirement smartly with Solo 401(k) today!
