Solo 401(k)
Also: Solo 401k, Solo 401(k), one-participant 401(k), individual 401(k)
A 401(k) plan for a business with no employees other than the owner and spouse. Combines elective deferrals up to $23,500 with employer profit sharing up to 25% of compensation, for a 2025 total limit of $70,000.
A Solo 401(k) is a regular 401(k) plan for an owner-only business. It permits both employee elective deferrals up to $23,500 (2025) and employer profit-sharing contributions up to 25% of compensation, with the combined limit at $70,000 ($77,500 with age-50 catch-up). Solo 401(k) plans support Roth deferrals, after-tax contributions with in-plan Roth conversions (mega backdoor Roth), and loans of up to $50,000 or 50% of the balance. The plan does not count toward IRA pro-rata rules, so it is the preferred way for high-earning consultants to maintain backdoor Roth IRA access.
Example: a consultant pays herself $160,000 in W-2 wages from her S corp. She defers $23,500 to the Solo 401(k) and the corp contributes $40,000 (25% of $160,000). Total 2025 contribution: $63,500, compared to only $40,000 possible in a SEP IRA at the same compensation.
Common mistake: opening the plan after December 31 and trying to back-date deferrals. The plan document must exist by year-end to allow employee deferrals for that year.
Solo 401(k) matters at any post-exit consulting setup, at side-hustle income at scale, and at pre-IRA rollover planning for high earners.