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How Solo 401K Will Help Your Small Business

Freelancers, entrepreneurs, independent workers, and others who are self-employed all struggle with the same issue: what is the best way to save for retirement?

While there are many options that may be beneficial for you and your business, a Solo 401k is one of the best ways to reap the retirement benefits usually only available to those at very large companies.

In this guide, we will outline the benefits of a Solo 401K retirement plan so that you can determine if it is the right option for you.

Why Should I Start a Solo 401k?

The benefits of a Solo 401k are many, but generally, it boils down to three big ones:

  1. Solo 401K Plans Allow for Huge Contributions. Solo 401k retirement plans allow for the highest total contributions available to the self-employed. Because you operate in two capacities, as an employee and an employer, you can make contributions as if you are two people. As an employee, you can contribute up to $19,500. On the other hand, as an employer, you can contribute $37,500. In total, you can add $57,000 every year to your retirement fund.
  2. Solo 401K Plans Give You Options When It Comes to Taxes. With a Solo 401K plan, you can choose to make Roth (after-tax) contributions or Traditional (pre-tax) contributions. Whichever method makes the most sense for your business is entirely up to you. You have to pay taxes on this money at some point, but the option to do it now or later empowers you as a business person.
  3. Solo 401K Plans Enable You to Take Out Loans. It’s been the case for time immemorial: we cannot predict the future. No matter how good you are at spotting trends, you would have never predicted the impact COVID 19 had on the world. While we are hopefully moving away from the global pandemic, there are always other threats to our stability, and the option to take out loans from your retirement fund during tough times is an excellent perk. With a Solo 401K, you can take out a loan of as much as $50,000. This allows you to stay afloat if you run into tough times and have no other options.

How Do I Start a Solo 401K?

The process for starting a Solo 401k retirement plan is extremely easy. You need only follow the steps listed below and you’ll be well on your way to starting your retirement fund:

  1. Contact a Plan Provider.
  2. Complete the Necessary Paperwork.
  3. Select Between Roth and Traditional Contributions.
  4. Start Contributing.


If you’re like most self-employed individuals, you couldn’t stand the thought of being stuck in an office while your bosses profited off of your labor. But now that you’re out on your own, it can be intimidating to realize that you bear all of the responsibility for your income, your tax obligations, and your retirement planning. Luckily, plans like the Solo 401k make it easy for you to enjoy the benefits of an excellent retirement fund.

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