Solo 401(k): Who Qualifies and What You Get
Learn how self-employed individuals can use a Solo 401(k) to save for retirement with higher contribution limits.
A Solo 401(k) is a retirement savings plan designed specifically for people who work for themselves.
Who it's for
This plan is for self-employed individuals. To qualify, you must have no employees, though you can hire a spouse.
What you get
The main benefit is the ability to contribute much larger amounts of money toward your retirement compared to a standard IRA. This is because you can contribute money both as the employee and as the employer.
What it costs you
While there is no direct fee to set up the plan, it does require extra administrative work. Once the total assets in your plan grow beyond a certain threshold, you are required to file an annual report with the government.
The catch to know
Because this is a more complex retirement structure, it involves more paperwork and administrative upkeep than a standard Individual Retirement Account (IRA).
How to apply
- Check that you meet the self-employment requirements.
- Choose a financial institution to host your plan.
- Complete the necessary paperwork to establish the account.
- Begin making contributions according to the rules.
For more details, visit the official portal: https://www.irs.gov/retirement-plans/one-participant-401k-plans