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Contribution Limits for a One-Participant 401(k) 


A one-participant 401(k) or solo 401(k) is an attractive retirement savings option for self-employed workers or business owners. While they’re similar to the standard 401(k) plans often offered at larger workplaces, one-participant 401(k)s allow solo business owners to exceed the contribution limits that other plans are subject to. Consider speaking with a financial advisor if you need help saving and planning for retirement.

What Is a One-Participant 401(k)?

A one-participant 401(k) is a retirement plan specifically tailored for sole proprietors, freelancers and small business owners with no employees besides their spouse.

Also known as an individual 401(k), these plans combine features of a traditional 401(k) with a profit-sharing plan, allowing you to contribute both as an employee and employer. As a result, a business owner with a one-participant 401(k) can potentially save well beyond the normal 401(k) contribution limit of $22,500 in 2023 and $23,000 in 2024.

One-Participant 401(k) Contribution Limits

A worker looking up contribution limits for one-participant 401(k) plans.

The IRS permits one-participant 401(k) owners to save up to $69,000 in 2024 or $76,500 if they’re 50 or older (an increase from $66,000 in 2023 or $73,500 for 50 or older). These totals comprise both the employee and employer contributions, the latter of which can equal up to 25% of their compensation from the business.

For the tax year 2024, the employee contribution limit for a one-participant 401(k) plan mirrors that of a standard 401(k) and similar plans: $23,000 ($22,500 in 2023). If you’re 50 or older, you can add catch-up contributions of up to $7,500. Employee contributions can be made on either a pre-tax or Roth basis.

For example, Mary is under age 50 and works as a personal trainer through an S Corporation that she operates, earning approximately $115,000 per year. She has a one-participant 401(k) and makes the maximum allowable contribution as an employee in 2024 – $23,000.

But one-participant 401(k) owners can also contribute up to 25% of their compensation as an employer. For Mary, this means she can make an additional contribution of $28,750 to her 401(k) if she wants. As a result, Mary is eligible to make a combined contribution of up to $51,750 to her one-participant 401(k).

Setting Up a One-Participant 401(k)

Setting up a one-participant 401(k) starts with eligibility. Again, you must be self-employed or a business owner with no full-time employees other than yourself and a spouse.

From there, you’ll need to select a financial institution that offers one-participant 401(k) plans. Banks, brokerage firms and mutual fund companies are common providers. Compare fees, investment options and features before making a decision.

Your chosen provider will supply the necessary plan documents. These documents outline the rules and features of your solo 401(k) plan. Ensure you understand these terms thoroughly. When establishing your plan, you’ll need to provide an employer identification number (EIN).

Once your account is opened, you can fund it through salary deferrals and employer contributions. Lastly, don’t forget to allocate the funds in your account to investments that your provider offers. You’ll want to choose investments that best align with your goals.

Traditional vs. Roth 401(k)

When it comes to the one-participant 401(k), you can pick your preference between traditional and Roth options. If immediate tax savings are a priority, then a traditional 401(k) may appeal to you with pre-tax contributions. However, be prepared for the withdrawals in retirement to be taxed as ordinary income.

Alternatively, Roth 401(k) takes a different approach with post-tax contributions. No immediate tax savings here, but when retirement arrives and it’s time for withdrawals, they can be completely tax-free.

Alternatives to a One-Participant 401(k)

A one-participant 401(k) is far from being the only retirement savings option for self-employed individuals or small business owners. Simplified employee pension (SEP) and savings incentive match plan for employees (SIMPLE) IRAs are other common alternatives.

Like the one-participant 401(k), SEP IRAs are subject to higher contribution limits but do not have the same loan provisions. SIMPLE IRAs, on the other hand, offer employer matching, albeit with lower contribution limits.

Bottom Line

A one-participant 401(k) or solo 401(k) is designated for self-employed workers and small business owners with no other employees, other than their spouses. In 2024, the IRS allows one-participant 401(k) owners to contribute as both an employee and employer. As a result, you can save up to $69,000 in a one-participant 401(k), plus an extra $7,500 if you’re 50 or older.

Retirement Planning Tips

  • SmartAsset’s retirement calculator can help you estimate how much your savings will be worth by the time you retire, as well as how much you may need to support your lifestyle.
  • A financial advisor can help you build a retirement plan tailored to your lifestyle and expenses. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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