Solo 401(k): Contributions and Planning for Business Owners

Two ways to contribute

A Solo 401(k) covers a business owner, or an owner and spouse. Eligible employees change the picture: “no full-time employees” is not a sufficient eligibility test. Confirm employee eligibility with the administrator before using an owner-only plan.

You can contribute as both employee and employer. For an S-Corp, the employer contribution can generally be up to 25% of eligible compensation. A sole proprietor uses a special calculation based on adjusted net self-employment earnings. Employee deferrals across your jobs share a personal annual limit. IRS one-participant plan guidance.

2026 catch-up contributions

The employee deferral limit is $24,500 in 2026. The standard age-50+ catch-up is $8,000; eligible participants turning 60–63 can use the higher $11,250 catch-up instead. Plan provisions and compensation limits still apply.

The 2026 Roth catch-up requirement uses prior-year wages from the sponsoring employer, not total household income. If those wages exceeded $150,000, applicable catch-up contributions must be Roth. Confirm how the rule applies to your employment and plan. IRS catch-up guidance.

An illustrative S-Corp contribution

Assume $150,000 of eligible W-2 compensation, no deferrals to another employer's plan, and a plan permitting the contributions. A $24,500 employee deferral plus a $37,500 employer contribution totals $62,000 before catch-up contributions. That is contribution arithmetic, not a promised tax saving. Traditional and Roth elections affect the current deduction and future tax treatment differently.

Choose the plan around the work it needs to do

Before opening a plan, ask the administrator:

• Which employees must be covered, including part-time employees?
• Does the plan support the Roth or after-tax features you actually need?
• What are the adoption, election, deposit, and annual filing deadlines for your entity?
• What happens if you hire, acquire another business, or add a cash balance plan?

Do not assume every custodian's standard plan supports the same features. Confirm the plan document and current provider terms. IRS Publication 560 describes small-business retirement plan rules and deadlines.

Planning your next step

See what a financial plan includes, learn about Ben Stauffer, or book an introductory call.

This is educational information, not personalized tax, legal, or investment advice. See disclosures.