Individual 401(k) Plans

An Individual 401(k), also known as a Solo 401(k), is a retirement savings plan tailored for self-employed individuals and small business owners with no full-time employees other than a spouse. This plan offers higher contribution limits and tax advantages compared to traditional retirement accounts.

Eligibility for an Individual 401(k) is limited to self-employed individuals or small business owners without full-time employees, except for a spouse who is employed by the business.

In 2025, the total contribution limit for an Individual 401(k) is $70,000 for individuals under 50. This includes:

• Employee Salary Deferrals: Up to $23,500 or 100% of compensation, whichever is less.
• Employer Contributions: Up to 25% of compensation.

For individuals aged 50 to 59 or 64 and older, an additional catch-up contribution of $7,500 is allowed, bringing the total limit to $77,500. Notably, for those aged 60 to 63, the catch-up contribution increases to $11,250, allowing a total contribution of $81,250. 

For self-employed individuals, contributions are based on net earnings from self-employment after deducting one-half of self-employment tax and contributions for yourself. It's advisable to consult IRS guidelines or a tax professional for precise calculations. 

Contributions to a traditional Individual 401(k) are made pre-tax, reducing your taxable income for the year. The investments then grow tax-deferred until withdrawal during retirement. Alternatively, if your plan offers a Roth option, contributions are made post-tax, but qualified withdrawals during retirement are tax-free.

Yes, you can contribute to other retirement plans, such as IRAs, in addition to your Individual 401(k). However, the total contributions must adhere to IRS limits, and contributions to multiple plans may affect your overall contribution limits. It's important to ensure compliance with IRS regulations when contributing to multiple retirement accounts.

Employee salary deferrals for 2025 should generally be made by December 31, 2025. Employer contributions can be made up until the business's tax filing deadline, including extensions. For sole proprietors and single-member LLCs, this is typically April 15, 2026, unless an extension is filed.