Question 1

What is a Solo 401(k)?

Accepted Answer

A Solo 401(k), also called an individual 401(k), is a retirement plan for self-employed individuals with no employees (other than a spouse). It allows both employee elective deferrals (up to $23,500 in 2026, plus catch-up contributions if age 50+) and employer profit-sharing contributions (up to 25% of net self-employment compensation), with a combined limit of $70,000 in 2026.

Question 2

Solo 401(k) vs SEP-IRA: which allows higher contributions?

Accepted Answer

At lower income levels (roughly under $185,000 in net self-employment income), a Solo 401(k) usually allows higher total contributions because of the employee deferral component ($23,500). A SEP-IRA is limited to 25% of net compensation with no employee deferral. At very high incomes both hit the same $70,000 cap, but the Solo 401(k) also allows catch-up contributions for those 50 and older.

Question 3

Can I make Roth contributions to a Solo 401(k)?

Accepted Answer

Yes. Many Solo 401(k) providers now allow designated Roth contributions for the employee deferral portion. Roth contributions are made after-tax but grow and can be withdrawn tax-free in retirement. The employer profit-sharing portion must be pre-tax (traditional). Starting in 2026, SECURE 2.0 also allows Roth employer contributions at some providers.

Solo 401(k)

Your Business

Employee Max

Employer Max

Total Solo 401(k)

SEP-IRA Max

SIMPLE-IRA Max

Solo 401(k) Advantage

Projected at Retirement

Which Plan Wins?

Contribution Room: Solo 401(k) vs SEP-IRA vs SIMPLE-IRA

Projected Growth Over Time