Solo 401(k) Guide for Self-Employed & Freelancers
Solo 401(k) contribution limits as both employee and employer, the Roth option, setup deadlines, and how it compares to a SEP IRA.
A solo 401(k) lets a self-employed person contribute both as employee (up to $23,500 in 2025) and as employer (about 20–25% of net income), reaching the $70,000 total cap at a much lower income than a SEP IRA.
What you'll walk away with
Skim these first — then dig into the details below.
- 1You contribute twice: $23,500 as employee plus an employer share of net income.
- 2The combined 2025 cap is $70,000, or $77,500 with the age-50 catch-up.
- 3Roth solo 401(k) contributions are available at most major custodians.
- 4Only you and a spouse can participate — hiring an employee ends eligibility.
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A solo 401(k) is the strongest retirement plan available to a self-employed person with no employees. Because you are both the employer and the employee, you get to make both types of contribution — which is why it reaches the same annual cap as a SEP IRA at roughly half the income.
Model your combined contributions and long-term balance in the 401(k) calculator, and plan the tax impact alongside your quarterly estimated taxes.
How the two contributions work
Think of them as separate buckets that share one overall ceiling. Both are optional, and you choose the amounts each year.
- Employee deferral: up to $23,500 in 2025, or 100% of compensation if lower.
- Catch-up at 50 or older: an additional $7,500.
- Employer contribution: about 20% of net self-employment income, or 25% of W-2 wages if incorporated.
- Combined cap: $70,000 in 2025, or $77,500 including catch-up.
- The employee deferral limit is shared across all 401(k)s, including one at a day job.
The Roth option
Most major custodians now offer a Roth solo 401(k), which is a meaningful advantage over the SEP IRA.
- Employee deferrals can be pre-tax, Roth, or split between them.
- Employer contributions were traditionally pre-tax; some plans now permit Roth treatment.
- Roth deferrals suit lower-income years when your marginal rate is temporarily low.
- Confirm your custodian actually supports Roth before opening — not all prototype plans do.
- Compare the tax tradeoff in our traditional versus Roth 401(k) guide.
Rules and deadlines to track
Solo 401(k)s require slightly more administration than a SEP, and two dates matter more than the rest.
- The plan must generally be established by the end of your tax year for employee deferrals.
- Employer contributions can be made up to your filing deadline, including extensions.
- Once plan assets exceed $250,000, you must file Form 5500-EZ each year.
- Only you and your spouse may participate; hiring a full-time employee triggers a plan change.
- Many plans permit loans of up to $50,000 or 50% of the balance.
Setting one up
Opening a solo 401(k) takes longer than a SEP but is still a same-week task at a major brokerage.
- 1
Get an EIN from the IRS if you do not already have one — it takes minutes online.
- 2
Open the plan at Fidelity, Schwab, or Vanguard and adopt the plan document.
- 3
Elect your deferral amount and whether it is pre-tax, Roth, or both.
- 4
Track employee and employer contributions separately for your tax return.
- 5
If you want the largest possible Roth space, check whether your provider supports after-tax contributions for a mega backdoor Roth.
Disclaimer: This page includes AI-assisted educational content reviewed for general accuracy. It is not personalized financial, tax, or legal advice. Verify numbers with a qualified professional and our editorial standards.
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Related guides that deepen the same decision.
SEP IRA for Self-Employed: Rules, Limits & Setup
A SEP IRA lets self-employed people contribute up to 25% of net self-employment income, capped at $70,000 in 2025, with very little paperwork — but every eligible employee must receive the same percentage.
ReadTaxesQuarterly Estimated Taxes: Deadlines & Calculation for Freelancers
If you expect to owe $1,000 or more at filing time, the IRS wants tax paid in four installments during the year — and paying 100% of last year’s tax bill in equal quarters keeps you penalty-free no matter what you actually earn.
ReadRetirementMega Backdoor Roth: After-Tax 401(k) to Roth Conversion
A mega backdoor Roth lets you contribute after-tax dollars to your 401(k) beyond the normal deferral limit and convert them to Roth, potentially adding $30,000 or more of tax-free savings per year if your plan supports it.
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