A Solo 401(k) is a retirement plan for self-employed individuals with no employees. It combines elective deferrals with employer profit-sharing contributions, giving self-employed people far higher contribution capacity than any IRA-based plan. This article covers who qualifies, how the two contribution streams stack, and what to know about the plan's downstream rules.

A Solo 401(k) — also called a one-participant 401(k), individual 401(k), or self-employed 401(k) — is a defined-contribution retirement plan for a business with one participant. It is the same legal structure as a standard 401(k) under Internal Revenue Code §401(k), but with simplified administration because only one person (and optionally a spouse) participates. The plan combines two contribution sources from the same individual: elective salary deferrals as the "employee" and profit-sharing contributions as the "employer."

At Retired.com, a Solo 401(k) can be held as a Self-Directed plan — broadening the range of investments well beyond what a conventional 401(k) custodian offers. See "What is a Self-Directed IRA (SDIRA)?" for the self-directed structure (the same custodial model applies to Solo 401(k) plans).

A Solo 401(k) is available to a self-employed individual or small-business owner who has:

The "no employees" rule is the defining constraint. If the business hires a single eligible employee (full-time, non-spouse), the Solo 401(k) generally cannot remain solo — the plan must convert to a standard 401(k) with broader coverage rules.

A spouse who earns income from the same business can be a second participant in the Solo 401(k) without disqualifying it.

The defining advantage of a Solo 401(k) is the ability to contribute as both employee and employer in the same year:

The combined contribution from both streams is capped at the IRS-defined total annual contribution limit for defined-contribution plans (also in IRS Pub 560 — typically several times higher than the IRA or SIMPLE limit).

Because both dollar amounts and percentage formulas matter, the math takes a few steps. We recommend consulting a tax advisor or attorney for guidance specific to your situation when modeling the contribution.

Most Solo 401(k) plan documents allow the employee elective deferral portion to be designated as Roth — after-tax contributions that grow tax-free, with tax-free qualified distributions later. The employer profit-sharing portion has historically been required to be pre-tax, though recent SECURE 2.0 changes have expanded the Roth options for employer contributions; plan documents and custodian capabilities vary on whether Roth employer contributions are supported.

Importantly, the SECURE 2.0 Act eliminated lifetime Required Minimum Distributions for designated Roth 401(k) accounts beginning in 2024 — bringing Roth 401(k) accounts in line with Roth IRAs on the RMD-during-lifetime question.

For pre-tax (Traditional) contributions:

For Roth contributions: after-tax in, tax-free qualified distributions out (subject to the same Roth five-year rules as a Roth IRA).

Unlike IRAs, a Solo 401(k) generally allows participant loans. The plan can permit a loan up to the lesser of 50% of the vested balance or $50,000, repayable over up to 5 years (longer for loans used to acquire a primary residence). IRA accounts do not permit loans — so this is a distinctive Solo 401(k) feature, often used for short-term liquidity without triggering a taxable distribution.

Once a Solo 401(k)'s total plan assets reach $250,000 at the end of the plan year, the plan administrator must file IRS Form 5500-EZ annually. Below $250,000 (and not in the plan's final year), no annual filing is required. The Form 5500-EZ filing is straightforward but is a real obligation — missing it can result in penalties. Contact the Service Team or a tax advisor for guidance on the filing process.

A Solo 401(k) follows the Traditional 401(k) framework for downstream rules:

For a self-employed individual with no employees, the choice often comes down to contribution capacity vs. simplicity:

For a business with employees, neither plan stays "solo" — the Solo 401(k) must become a standard 401(k), and SEP IRAs would require uniform-percentage contributions for all eligible employees.

We recommend consulting a tax advisor or attorney for guidance specific to your situation.

Does the $250,000 Form 5500-EZ trigger include just the business owner's account, or also a spouse's?
The $250,000 threshold applies to the total plan assets — so both the business owner's and (if applicable) the spouse's balances combined. Once the total crosses the threshold, the filing requirement applies for that year and going forward.

Can I have both a Solo 401(k) and a Traditional or Roth IRA in the same year?
Yes. The Solo 401(k) and personal IRAs have separate contribution limits. Having a workplace plan (which a Solo 401(k) is) can affect the deductibility of Traditional IRA contributions at higher incomes, and Roth IRA contributions are subject to MAGI phase-outs that apply regardless.

What happens if I hire an employee?
The plan generally must convert to a standard 401(k) with the coverage and nondiscrimination rules that apply to broader 401(k) plans. There are some exceptions (notably, the hired employee may not be immediately eligible under the plan's service-and-age provisions), but the long-term planning question becomes whether the standard 401(k) administration cost is worth it. We recommend consulting a tax advisor or attorney before hiring if you have a Solo 401(k) in place.

Can a Solo 401(k) hold the same kinds of assets a Self-Directed IRA can?
In principle, yes — at a custodian that allows it. The Solo 401(k) structure can hold real estate, private equity, precious metals, cryptocurrency, and the same broad range of alternative assets an SDIRA can hold. The prohibited-transaction rules apply somewhat differently to plan-vs-IRA contexts; consult a tax advisor on the specifics.

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