A Solo 401(k) is one of the fastest ways to grow a large retirement account for yourself and your family. Solo 401(k)s of a million dollars and more can be built in a matter of years not decades. Read the article below to see if you qualify for your own Solo 401(k).
Do I Qualify?
Many people who own a business have a goal in addition to earning a living. They also want to quickly build their retirement account. If this is you, here’s great news! There’s a plan that will help sole proprietors achieve these goals.
Introducing the Self-Directed Solo 401(k) plan. A Self-Directed Solo 401(k) plan is a qualified retirement plan designed for self-employed professionals that allows them to make large income tax-deferred contributions for their retirement.
Ten Times Faster.
Just how much faster can you build your retirement fund? Ten Times Faster. Yes, a Solo 401(k) allows you to contribute ten times as much annually compared to an IRA.
Question: I already have an IRA. Can I also contribute to a Solo 401(k) and the same time?
Answer: YES, and you may make a contribution to both.
Question: Can anyone have a Solo 401(k)?
Answer: Sorry, No. To have a Solo 401(k) you must meet the requirements below.
Question: Is this plan tested and clearly part of the IRS and Department of Labor codes?
Answer: YES, the Solo 401(k) was established by the Economic Growth and Tax Reconciliation Relief Act of 2001. It has been available to all qualified individuals for almost 25 years.
Question: My Spouse helps in my business, can my spouse also contribute to a Solo 401(k)?
Answer: Yes, if they are active in the business.
Who can establish a Solo 401k?
- Self-employed individuals (and their spouses) with no W-2 employees.
And
- Self-employed individuals (and their spouses) with only one part-time W-2 employee who works less than 1000 hours per year.
Some examples of businesses that qualify for a Solo 401(k):
- Consultants who work on their own and not with a large consisting company.
- Contractors who have no staff and instead “job out” the projects to sub-contractors.
- The vast majority of people who sell a product online.
Question: I already have a full-time job which provides me with a Retirement Plan. However, I have this side business that earns extra money. May I have a Solo 401(k) on the side business.?
Answer: YES.
Question: I have a side business with no employees. However, I don’t file a tax return for that business and hence, I pay no income taxes on that income. Can I start a Solo 401(k)?
Answer: Of course not, what you just described is INCOME TAX FRAUD. Your first step is to see a Tax Professional and tell them you want to end the fraud.
Hint: Do it now.
The Two Hat Theory
- What is the secret that allows large contributions to a Solo 401(k)?
And
- How much may I contribute to a Solo 401k for the 2025 tax year?
It is called the Two Hat Theory, and it works like this:
If you own a business and have no employees or maybe just a single part-timer who works less than 1,000 hours a year. The Department of Labor knows you wear two hats.
- You are the laborer.
You may pack the boxes and print the shipping labels.
You may do the calculations and type the reports for the clients.
You may set up the chairs before the presentation.
It doesn’t matter if you are a professional or not. “You” are doing the labor.
Hence, you are allowed to contribute to a Solo 401(k) of up to 100% of your salary (not to exceed $23,500).
Plus, the Department of Labor also recognizes you are the manager because you make every management decision.
- You are the manager.
You decide if the business should buy equipment.
You decide If you will rent office space or work from home.
You decide the fee schedule.
Etc.
Hence, you are allowed to also contribute as a manager.
For a Solo 401(k) the “manager” contribution can be up to 25% of company earnings. The total of “Laborer” and “Manager” contributions cannot exceed $70,000 for 2025.
However, there’s more:
If you are age 50 or over, you may make an extra contribution (called the Catch-up contribution) of up to $7,500 a year.
PLUS, for persons aged 60-63, You may make a super catch-up contribution of an additional $11,250.
The income tax impact of contributing to a Solo 401(k)
If you start a Solo 401(k) you have a choice. It can be opened as a “Traditional” or a “Roth”.
Traditional: If you select “Traditional” your contribution to the Retirement account is 100% deductible from your income when computing, your income taxes. (However, you will pay income tax on the distribution you draw from the account in the future,)
Roth: If you select “Roth” your contribution to the Retirement account is not deductible from your income when computing your income tax. However, when you take distributions from the Solo 401(k) the distributions will not be taxed.
What investment may I hold in a Solo 401k?
A Self Directed Solo 401k from IRA Club is among the most user-friendly plans you can own when selecting investment options. Your Solo 401k can invest in things you know and understand best. Use your experience and know-how to build exactly the investment portfolio you have always wanted. Invest in real estate, promissory notes, life settlements; Undeveloped land, AI Stock Portfolios, Gold, Crypto Currency,
the list goes on and on.
I found the investment, what’s the next step?
Once you’ve found an investment you want, you will talk with IRA Club’s investments and compliance team. We handle all the administrative work and help you with the documents to make the process seamless for you.
For information about the Self-Directed IRA or Solo 401k, call IRA Club at 312-795-0988
Be advised that IRA Club does not evaluate, review, monitor, recommend, warrant, guarantee or otherwise endorse the legality, tax treatment, propriety, performance or reliability of any investment, service, statement, opinion or other representation provided with respect to the investment opportunities listed on its site or their sponsors or providers. IRA Club has no financial arrangement, partnership, joint venture, or other affiliation with the sponsors or providers of these investments. IRA Club shall not be liable for any misinformation, misrepresentation, negligence, act, omission, investment results or any wrongdoing with respect to any of these investments or their sponsors or providers.
