How to Set Up a 401(k) as a Solo Entrepreneur

 

How to Set Up a 401(k) as a Solo Entrepreneur

Being your own boss is liberating, but it also means you're responsible for your retirement savings.

If you're a solo entrepreneur looking to build long-term wealth, a Solo 401(k) can be a powerful tool.

Let’s break down how to set one up, what benefits you’ll get, and how to get started—step by step.

📌 Table of Contents

What is a Solo 401(k)?

A Solo 401(k), also called an Individual 401(k), is a retirement savings plan designed specifically for self-employed individuals without full-time employees.

It allows you to contribute both as an employer and as an employee, maximizing your retirement contributions.

Why Choose a Solo 401(k)?

It offers higher contribution limits than traditional IRAs.

You can make both pre-tax and Roth contributions.

Solo 401(k)s often allow you to take loans from your balance.

Many providers offer zero setup fees and low maintenance costs.

Who’s Eligible to Set One Up?

Anyone who is self-employed or owns a small business with no full-time employees other than a spouse qualifies.

This includes freelancers, consultants, and independent contractors.

Step-by-Step: How to Set Up a Solo 401(k)

1. Choose a Provider: Look for a provider that offers Solo 401(k) plans with the features you want—Roth option, low fees, loan access, etc.

2. Apply and Establish the Plan: Complete the adoption agreement and account application. Some providers allow online setup.

3. Obtain an EIN: You’ll need an Employer Identification Number (EIN) from the IRS to set up the account. Apply online at IRS.gov.

4. Fund Your Plan: You can contribute up to $23,000 as an employee (2025 limit, under age 50), plus 25% of business profit as employer contribution.

5. Maintain Records: Once your plan balance exceeds $250,000, you must file Form 5500-SF annually with the IRS.

Top Solo 401(k) Providers in the U.S.

Fidelity: Offers no-fee setup and a simple user interface.

Charles Schwab: Also free to set up, but does not support Roth contributions.

Vanguard: Excellent for long-term investors, though requires paper forms to open.

Rocket Dollar: Good for those looking to invest in alternative assets (real estate, crypto, etc.), but charges setup and annual fees.

Contribution Limits & Tax Benefits

For 2025, total contributions (employee + employer) can be up to $69,000 if under 50, and $76,500 if age 50 or older.

Roth contributions are taxed now but grow tax-free, while pre-tax contributions reduce taxable income today and are taxed upon withdrawal.

You can deduct employer contributions as a business expense, reducing your overall tax bill.

Useful Resource for U.S. Entrepreneurs

For more information on setting up a Solo 401(k), managing taxes, and other tips tailored to solo entrepreneurs, check out this curated guide:

📘 Read Full Solo 401(k) Guide

This page walks you through real-world scenarios, additional tax strategies, and common pitfalls to avoid.

Solo entrepreneurs deserve to retire with peace of mind—and the right plan helps make that happen.

Start building that future now, one contribution at a time.

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