Is a Solo 401(k) Right for You? A Powerful Tool for Self-Employed Retirement Planning

If you're self-employed and serious about retirement savings, a Solo 401(k) offers flexibility, high contribution limits, and strong tax advantages. It’s one of the most efficient ways to build

wealth for the future.

If you're self-employed or own a business with no full-time employees (other than your spouse), a Solo 401(k)—also known as an Individual 401(k)—could be one of the most powerful retirement tools at your disposal.

What Is a Solo 401(k)?

A Solo 401(k) is a retirement plan designed specifically for self-employed individuals or business owners with no full-time staff. It combines features of a traditional 401(k) with a profit-sharing plan, allowing for significantly higher contributions than other retirement options.

Who Qualifies?

You can open a Solo 401(k) if:

• You’re self-employed or run a business with no full-time employees (excluding your spouse).

• You may have part-time workers, but none who work over 1,000 hours per year.

Once you hire full-time staff (outside of your spouse), you’ll need to convert to a traditional 401(k) plan.

Contribution Limits for 2025

The Solo 401(k) offers two ways to contribute:

1. Employee Deferral – Up to $23,500 in 2025 (plus catch-up contributions up to $11,250 depending on your age).

2. Employer Contribution (Profit-Sharing) – Up to 25% of compensation, for a total maximum annual contribution of $70,000 in 2025 (not including catch-up contributions).

   
   

These generous limits make the Solo 401(k) ideal for high savers looking to maximize retirement contributions.

Key Benefits

·      High Contribution Limits – Allows you to save more than most other plans.

·      Flexible Contributions – You choose how much to contribute each year.

·      Roth Option Available – Tax-free growth potential.

·      Loan + Rollover Options – Borrow from your plan or roll over funds from other qualified accounts.

·      Strong Bankruptcy Protection – Assets are protected under federal law in bankruptcy cases.

A Smart Strategy for Side Hustles

If you have a side business in addition to your primary job, a Solo 401(k) lets you shelter a large portion of that income—even if you already contribute to a workplace 401(k). Coordinating contributions is key, so be sure to work with a financial advisor.

Considerations

• You’ll need to file Form 5500-EZ with the IRS once your plan exceeds $250,000 in assets.

• If you hire full-time employees, you’ll need to convert to a standard 401(k) and meet additional compliance rules.

• Investment options may be more limited than employer plans, depending on the provider.

  
  

If you're self-employed and serious about retirement savings, a Solo 401(k) offers flexibility, high contribution limits, and strong tax advantages. It’s one of the most efficient ways to build

wealth for the future.

Sal is the President of CORA Capital Advisors, where he leads a team of seasoned wealth management professionals. With over 30 years of experience in the financial industry, Sal brings a practical, client-first approach to helping individuals and business owners reach their financial goals. He specializes in wealth accumulation, retirement and estate planning, and business succession strategies. A CERTIFIED FINANCIAL PLANNER™ and lifelong educator, Sal frequently shares his insights as a guest speaker and commentator. You can reach Sal at (856) 513-8600 or info@coracap.com.