Available to self-employed individuals with no full-time employees (spouse can participate) Employee deferrals up to the 402(g) limit plus employer profit-sharing up to 25% of net self-employment income Total contributions can reach the 415(c) annual additions limit (check IRS.gov for current year limits) Roth option available for employee deferrals — grow self-employed income tax-free

Self-employed retirement plans can shelter far more than the standard IRA contribution limit Solo 401(k) offers the best combination of high limits, Roth option, and flexibility for most sole proprietors High earners over 40 should evaluate defined benefit plans for substantially higher contribution capacity Consult a financial advisor to determine the optimal plan structure based on your income, age, and goals

Solo 401(k) & Self-Employed Retirement Plans

Curated by: Rubric Advisors

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Solo 401(k) Overview

Available to self-employed individuals with no full-time employees (spouse can participate)
Employee deferrals up to the 402(g) limit plus employer profit-sharing up to 25% of net self-employment income
Total contributions can reach the 415(c) annual additions limit (check IRS.gov for current year limits)
Roth option available for employee deferrals — grow self-employed income tax-free

SEP IRA: Simple High-Limit Option

Employer-only contributions up to 25% of net self-employment income (up to the annual limit)
No employee deferral component — all contributions come from the business side
Very simple to set up and administer — no annual IRS filings required below the reporting threshold
Caution: if you have employees, you must contribute the same percentage for all eligible employees

SIMPLE IRA for Small Businesses

Available to businesses with 100 or fewer employees — useful as the business grows
Employee deferrals up to the annual SIMPLE limit + mandatory employer match (up to 3%) or 2% non-elective
Lower contribution limits than Solo 401(k) or SEP — best for moderate-income self-employment
Two-year waiting period before rolling SIMPLE IRA funds to another plan type without penalty

Defined Benefit / Cash Balance Plans

Can shelter dramatically more income — potentially $200K-$300K+ per year depending on age and income
Contributions are based on actuarial calculations targeting a specific retirement benefit
Best suited for high-earning self-employed professionals over age 40 with consistent income
Higher setup and administration costs ($2,000-$5,000+ annually) — requires an enrolled actuary

Choosing the Right Plan

Solo 401(k) is the most flexible option for most self-employed individuals — highest limits with Roth option
SEP IRA is simplest if you want employer-only contributions and have no employees
Defined benefit plan is optimal for high earners over 40 who want to maximize tax-deferred savings
Plans can be combined — a Solo 401(k) paired with a defined benefit plan maximizes total contributions

Key Takeaways

Self-employed retirement plans can shelter far more than the standard IRA contribution limit
Solo 401(k) offers the best combination of high limits, Roth option, and flexibility for most sole proprietors
High earners over 40 should evaluate defined benefit plans for substantially higher contribution capacity
Consult a financial advisor to determine the optimal plan structure based on your income, age, and goals

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Solo 401(k) Overview

SEP IRA: Simple High-Limit Option

SIMPLE IRA for Small Businesses

Defined Benefit / Cash Balance Plans

Choosing the Right Plan

Key Takeaways

Related Topics

SEP IRA and SIMPLE IRA — Retirement Plans for Small Businesses

Tax Strategies for Sole Proprietors

401(k) Withdrawal Rules

Solo 401(k) Overview

SEP IRA: Simple High-Limit Option

SIMPLE IRA for Small Businesses

Defined Benefit / Cash Balance Plans

Choosing the Right Plan

Key Takeaways

Related Topics

SEP IRA and SIMPLE IRA — Retirement Plans for Small Businesses

Tax Strategies for Sole Proprietors

401(k) Withdrawal Rules