Solo 401(k) Plans

  • When you’re self-employed, it can be difficult to look toward the future when you’re trying to build your business in the here and now. However, this doesn’t mean you should brush off your retirement savings for a future date. In fact, the longer you push off your savings, the less you will have to enjoy your senior years. At The Retirement Advantage (TRA), our self-employed retirement plans and TPA solutions are designed to provide all of the advantages of a corporate plan without hurting your delicately balanced bottom line. We can help make sense of the plans to help you make the best choice.

    Self-employed individuals and businesses employing only the owner, partners and spouses have several options for tax-advantaged retirement savings: an individual 401(k), a SEP IRA, a SIMPLE IRA or a profit-sharing plan. Each option has distinct features and amounts that can be contributed to the plan each year. Use the Individual 401(k) Contribution Comparison to estimate the potential contribution that can be made to an individual 401(k) as compared to a profit-sharing, SIMPLE, or SEP plan for 2024.

    Solo 401(k) Calculator


    • What is a Solo 401(k) plan?

      A Solo 401(k) is a type of retirement plan that allows business owners, partners or spouses to contribute a portion of their compensation, before income taxes, to a company-sponsored retirement plan.

    • What are the benefits of a Solo 401(k)?

      The TRA Solo 401(k) is designed to ensure that self-employed businesses have the ability to maximize their personal retirement contributions and reduce taxes.

      The benefits of the Solo 401(k):

      • Is easy to manage
      • Is easy to save
        1. Higher contribution limits than SEP or Simple IRA plans
        2. Employee: up to $23,000 in salary deferrals ($30,500 if age 50+) per year
        3. Employer: 25 percent of employee’s compensation, or $69,000 ($76,500 if age 50+) — whichever is less
      • Provides flexible investment options
      • Is affordably priced
    • Who may establish a Solo 401(k)?

      The Solo 401(k) is only available to businesses with 100 or fewer employees who earn $5,000 or more a year.

    • Who may participate in a Solo 401(k)?

      Self-employed business owners, their spouses or additional owners may participate in this plan. Eligible businesses may not have any other employees. Businesses include corporations, partnerships, sole proprietors and limited liability corporations.

    • How do I start a Solo 401(k)?
      1. Adopt a written plan, called the plan document, which outlines its day-to-day operations.
      2. Identify a plan provider and/or trust for the plan’s assets and investments.
      3. Select a recordkeeper or recordkeeping system to track contributions, earnings and losses, and distributions. This person or entity will also help prepare the annual return, which must be filed with the federal government.
      4. Select a third party administrator to maintain the plan document, fulfill daily tasks and ensure compliance with federal regulations. Your financial advisor may choose a third-party administrator and/or recordkeeper on your behalf.
      5. Provide eligible employees, or plan participants, with a summary plan document (SPD), which is the document that outlines who can participate and how the plan works.

      The written plan also provides a central document, or collection of documents, which explains the rights of the employees and employee eligibility for participating in the plan and enables government agencies to determine whether it satisfies applicable laws.

      If the plan allocates responsibilities for performing administrative functions to other parties, such allocation must identify who is responsible for ensuring compliance with the requirements of the tax code, including compliance requirements for loans and distributions.

      In the case of a funding through multiple financial institutions, the employer may adopt a single written plan to coordinate administration among the financial institutions, rather than having a separate document for each issuer.