A Solo 401(k) is typically the better choice if you are self-employed and want to save more than $7,500 a year. In 2026, it lets you contribute up to $72,000. That's almost 10 times what an IRA allows. The higher limit means you can lower your taxes now while saving more for the future.
A Solo 401(k)'s saving and tax advantages over an IRA can make it appealing for those earning over $75,000 per year. Watch this video for the highlights:
Key Takeaways
- A Solo 401(k) lets you save up to $72,000 in 2026, or $80,000 with the age-50-plus catch-up, and $83,250 if you're 60 to 63. That's well beyond the $7,500 IRA limit ($8,600 if you're 50 or older).
- The Roth option in a Solo 401(k) has no income limit, so high earners can use it even if they don't qualify for a Roth IRA.
- Many 401(k)s include a loan option while IRAs do not.
- If you save less than $7,500 a year, an IRA's simpler setup might be a better fit than a Solo 401(k).
Is a Solo 401(k) Better Than an IRA for the Self-Employed?
For most self-employed business owners who want to save a lot, a Solo 401(k) beats an IRA. It offers higher contribution limits, Roth access, and loan options. The trade-off is a little more setup and upkeep costs. It's worth it mainly if you plan to save more than the $7,500 that IRAs allow in 2026. If you plan on saving $7,500 or less, the relatively lower cost and simplicity of an IRA might be a better fit.
If you're self-employed or run a business with no employees, you likely qualify for a Solo 401(k). It's a retirement plan built for you and for your spouse if they're on payroll too. It gives you the same benefits as a traditional employer 401(k), but you don't need employees to set it up.
Ready to see your options? Get a Solo 401(k) quote today.
How Much Can I Contribute to a Solo 401(k)?
In 2026, you can put up to $72,000 into a Solo 401(k). That includes both your employee and employer contributions. The limit increases to $80,000 if you're 50 to 59 or 64 and older. It goes up to $83,250 if you're between ages 60 to 63.
Employee vs. Employer Contributions
A Solo 401(k) has two contribution types. As the employee, you can defer up to $24,500 of your income in 2026. As the employer, your business can add more on top of that. This is called a profit-sharing contribution.
For example, say you contribute the full $24,500 as an employee. You would still have up to $47,500 in employer contribution room, up to the $72,000 combined limit.
Not sure how much you can contribute? Try our Solo 401(k) contribution calculator to estimate your limit.
| 2026 Contribution Limits | 401(k) | IRA |
|---|---|---|
| Standard annual limit | $72,000 (employee + employer) | $7,500 |
| Catch-up, age 50-59 or 64+ | +$8,000 (total $80,000) | +$1,100 (total $8,600) |
| Catch-up, age 60-63 | +$11,250 (total $83,250) | +$1,100 (total $8,600) |
| Roth income limit | None | Phases out $153K-$168K (single) / $242K-$252K (joint) |
| Penalty-free loan access | Yes, in most plans | No |
The income phase-out range for taxpayers making Roth IRA contributions begins at $153K, hitting $0 at $168K for singles (range is $242K-$252K for married couples filing jointly).
Solo 401(k) vs. Roth IRA: Which Has Better Tax Options?
A Solo 401(k)'s Roth option has no income limit. That means high earners can use it even if they don't qualify for a Roth IRA. In 2026, Roth IRA eligibility starts phasing out at $153,000 for single filers, or $242,000 for joint filers. It disappears completely above $168,000 or $252,000.
If your income is above those limits, you can't put money directly into a Roth IRA. But you can still make Roth contributions to a Solo 401(k). In 2026, you can add up to $24,500 in Roth contributions, no matter how much you earn.
Can I Take a Loan From My Solo 401(k)?
Yes. Most Solo 401(k) plans let you take a loan from your own balance with no credit check. You usually have up to five years to pay it back, or up to 30 years if you use it to buy a home.
This can be a helpful safety net if you need cash fast. But borrowing from your own plan has some downsides:
- Your money isn't invested while it's out on loan. That means it isn't growing for retirement during that time.
- If you leave your business, or don't repay the loan on time, the rest of the balance can become taxable. It may also trigger an early withdrawal penalty.
Who Qualifies for a Solo 401(k)?
You qualify for a Solo 401(k) if you're self-employed, or if your business has no full-time employees besides you and your spouse. If your business has other full-time employees, you won't qualify. You'll need a different plan type instead.
Multiple owners can open a Solo 401(k) together too, as long as there are no outside employees.
FAQs
What is a Solo 401(k)?
A Solo 401(k) is a retirement plan made for self-employed people and owner-only businesses. It works like a traditional employer 401(k). You contribute as both the "employee" and the "employer." That's why it has a much higher limit than an IRA.
Can I have a Solo 401(k) and an IRA at the same time?
Yes. You can contribute to both in the same year, as long as you stay within each account's own limit. Many self-employed savers use a Solo 401(k) as their main plan and keep an IRA too.
What's the contribution limit difference between a Solo 401(k) and an IRA?
In 2026, a Solo 401(k) allows up to $72,000 in total contributions. An IRA caps out at $7,500. That's about 10 times more room to save with a Solo 401(k). It's the main reason higher earners often choose it.
Is a Solo 401(k) better than a traditional IRA specifically?
For most self-employed savers who can put in more than $7,500 a year, yes. The higher limit and loan option usually make a Solo 401(k) the better choice. If you save less than that, an IRA's lower cost and easier setup might work better for you.
Do I qualify for a Solo 401(k) if my spouse works in the business with me?
Yes. A Solo 401(k) can cover you and your spouse, as long as there are no other full-time employees. Each of you has your own contribution limit.
What happens if my business grows and I hire employees?
If you hire full-time employees other than your spouse, you'll no longer qualify for a Solo 401(k). You'll need to switch to a different plan, like a Safe Harbor or Traditional 401(k), that covers your staff.