Solo business owners have more control over their income than traditional employees, but they also carry more responsibility when it comes to retirement. A solo 401k lets you contribute both as the employer and employee, unlocking higher savings potential than standard retirement plans.
Using a solo 401k calculator helps you take full advantage of your contribution limits. It gives you a clear picture of how much you can set aside based on your income, entity type, and compensation method.
If you’re running a single-member LLC or a solo S corporation, knowing your solo 401k options now sets the stage for long-term financial security and flexible life design later.
What is a solo 401k?
A solo 401k is a retirement plan designed for self-employed individuals with no full-time employees other than a spouse. It functions much like a traditional 401k but allows you to contribute both as the employee and the employer, dramatically increasing your savings potential.
These plans offer both Roth and pre-tax options, tax-deferred growth, and flexible contribution timing. Unlike traditional workplace plans, you’re in complete control of contributions, investments, and withdrawals.
One-participant 401k plans offer the same benefits as employer-sponsored 401k plans but without the red tape. For high-earning solos, they provide an efficient path to reducing taxable income and building retirement wealth on your terms.
Eligibility for investing in a solo 401k
To qualify for a solo 401k, you must earn self-employment income and have no full-time employees aside from yourself and, optionally, your spouse–this includes business owners operating as sole proprietors, single-member LLCs, S corps, and partnerships.
The solo 401k was created to give small business owners the same retirement savings power as larger companies, without the administrative burden of a traditional plan. If you’re running a business of one, you can contribute in two ways:
- Employee deferrals up to the annual IRS limit
- Employer profit-sharing contributions based on your business income
Solo 401k plans are available to a wide range of business entities, making them one of the most flexible retirement tools available for solopreneurs.
How to calculate solo 401k contribution limits
Understanding how much you can contribute to a solo 401k depends on your business structure and net earnings. You’re allowed to contribute in two roles:
- As the employee: Up to $23,000 in 2024 (or $30,500 if you’re 50 or older)
- As the employer: Up to 25% of compensation (or 25% for sole props and single-member LLCs)
The combined limit for 2024 is $66,000, or $73,500 with catch-up contributions. However, calculating your exact amount can be tricky, especially with varying rules for W-2 wages vs. self-employment income.
A solo 401k calculator for the self-employed can help you model contributions based on your income, age, and entity type. It’s a simple way to stay compliant and optimize your savings.
Implementing and maintaining a solo 401k plan
Setting up a solo 401k is easier than it sounds, especially with the right provider. You’ll need an EIN, a written plan document, and a solo 401k custodian to hold the funds. Many solos use brokerage firms to open an account and manage investments.
To stay compliant:
- Adopt the plan by December 31 if you want to contribute for the current tax year
- Track contributions carefully to avoid exceeding annual limits
- File Form 5500-EZ each year once the plan exceeds $250,000 in assets
Maintenance is minimal for most solos, especially in the early years. However, good recordkeeping and a plan that fits your income style—W-2, distributions, or both—can make the difference between hassle and high performance.
Besolo offers expert-backed support to help you implement your solo 401k and align it with your long-term goals.
Examples of contribution limits
Solo 401k contributions depend on your net income and business structure. You contribute in two roles: as the employee, up to the annual IRS limit, and as the employer, based on your business’s net earnings or W-2 salary.
1. Sole proprietorship or single-member LLC
Angela runs a freelance graphic design business and operates as a single-member LLC. After deducting expenses, her net income is $80,000.
- As the employee, she can contribute up to $22,500 (or $30,000 if she’s 50+)
- As the employer, she can contribute up to 20% of net self-employment income, around $16,000
- Total potential contribution: $38,500 to $46,000, depending on age
This structure is ideal for solos who want to maximize contributions without the payroll overhead. Besolo offers LLC formation tools and support that align with solo retirement planning.
2. S-Corp or C-Corp
Marcus pays himself a $60,000 W-2 salary through his S-corp. His business also retains additional profit.
- As the employee, he can contribute $22,500 (or $30,000 if age 50+)
- As the employer, the business can contribute up to 25% of their salary, $15,000
- Total potential contribution: $37,500 to $45,000
Contribution limits are based only on W-2 income, not S-corp distributions. Use Besolo’s S corp tax rate calculator for solopreneurs to optimize how you split salary and dividends while planning retirement contributions.
3. Partnership or multi-member LLC
John and Julie co-own a consulting firm and file as a partnership. John’s share of net self-employment income is $100,000.
- He can contribute $22,500 as an employee (or $30,000 if age 50+)
- As the employer, he can contribute about 20% of his share—$20,000
- Total potential contribution: $42,500 to $50,000
Each partner tracks and makes contributions based on their income share.
Build long-term security with the right solo 401k strategy
Investing through a solo 401k gives solopreneurs the freedom to grow wealth on their terms. Whether you’re operating as a sole proprietor or running payroll through an S corp, understanding your contribution limits helps you take full advantage of the plan’s flexibility and tax benefits.
Using a solo 401k calculator is the first step—joining Besolo is the next. Our expert-backed platform helps you form an LLC or a solo S corp, optimize your tax strategy, and unlock solo 401k benefits with confidence*. With Besolo, you’ll be able to:
- Contribute up to $70K pre-tax or Roth
- Easily access up to $50K of your 401K balance through a 401K loan
- Choose a self-directed option
Become a Besolo member today and start building a business designed for long-term financial freedom.
