For the owner-only business, the Solo 401(k) is the heavyweight: you contribute as both employee and employer, which can push totals well beyond an IRA’s.
Key takeaways
- For a business with no common-law employees other than a spouse.
- You can contribute as both employee and employer, allowing larger totals.
- A Roth deferral option may be available.
What it is
A one-participant 401(k) for owner-only businesses. The account is a structure; the investments it holds are separate and carry their own risks.
Who it’s for
- Owner-only businesses, optionally including a spouse
- High earners wanting to maximize contributions
- Those who value a Roth deferral option
- Self-employed savers with no full-time employees
How it works
- Adopt a one-participant 401(k) plan for your owner-only business.
- Make employee deferrals and employer contributions.
- Assets grow tax-deferred (or tax-free for Roth deferrals).
Eligibility
Owner-only businesses (optionally including a spouse) with self-employment or business income and no other full-time employees.
Contributions and funding
Employee deferral $24,500 plus an $8,000 catch-up (50+) — or $11,250 for ages 60–63 — for 2026, with employer contributions bringing the combined total (Section 415(c)) up to $72,000 ($80,000 with catch-up). Note: beginning in 2026, catch-up contributions must be Roth for participants whose prior-year wages exceeded $150,000. 2026 tax year
A worked example
In 2026 you might defer $24,500 as the employee and add an employer contribution, bringing the combined Section 415(c) total up to $72,000 (more with catch-ups). Note that beginning in 2026, catch-up contributions must be Roth for participants whose prior-year wages topped $150,000.
What it can hold
Publicly traded securities and, depending on the plan and custody model, permitted alternative assets.
Taxes and reporting
Pre-tax deferrals and earnings are taxed on withdrawal; Roth deferrals can be tax-free if qualified. Larger plans may require a Form 5500 filing. Requires tax review
Withdrawals and distributions
Ordinary-income treatment for pre-tax amounts; early-withdrawal additional taxes may apply. RMDs apply at the applicable age.
How Investor Services custodies it
Investor Services custodies the plan’s assets and processes the contributions and investments you direct. The plan document, nondiscrimination testing, and any filings are the sponsor’s responsibility.
Risks and limitations
- Adding employees can end eligibility
- Contribution math must respect the combined limit
- Investment risk, including loss of principal
Common mistakes to avoid
- Hiring a full-time employee and losing solo eligibility
- Exceeding the combined Section 415(c) limit
- Missing a Form 5500 once plan assets cross the threshold
- Overlooking the new Roth catch-up rule for high earners
Frequently asked questions
Can my spouse participate?
Yes, if they earn income from the business.
Is there a Roth option?
Many plans allow Roth deferrals.
Do I file a Form 5500?
Once plan assets exceed the threshold, an annual filing is generally required.
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.