A solo 401(k) is a 401(k) plan for a self-employed person with no full-time employees. The IRS calls it a one-participant 401(k): you contribute in two roles, employee deferrals up to $24,500 for 2026 plus employer profit-sharing, sharing one $72,000 cap ($80,000 at age 50+). A working spouse can join too.

How much can I contribute to a solo 401k in 2026?

Up to $72,000 total for 2026 — $80,000 if you are 50 or older, $83,250 at ages 60–63. That combines a $24,500 employee deferral (plus the catch-up) with employer profit-sharing of 25% of W-2 wages or about 20% of net self-employment income, all within the cap. You need enough earned income to support the contributions.

Can I have a solo 401k if I also have a W-2 job with a 401(k)?

Yes, but the $24,500 employee deferral limit is shared across every plan you use. If your day job’s 401(k) already absorbs the full deferral, your solo plan can only receive employer profit-sharing. The $72,000 total cap, though, applies to each plan separately.

Solo 401k vs SEP IRA — which is better?

The solo 401(k) usually wins below very high incomes because its $24,500 employee deferral adds room a SEP cannot match — $46,804 versus $22,304 in our $120,000 example. The SEP wins on simplicity and near-zero paperwork, but it has no catch-up contributions and no Roth option.

Can I borrow from my solo 401k?

Yes, if your plan allows it — up to the lesser of $50,000 or half your vested balance , generally repaid within five years with interest going back into your own account. Default or leave the business, and the balance can become a taxable distribution, with the 10% penalty if you are under 59½.

Investing

Solo 401k: The Self-Employed Retirement Plan, Explained

If you work for yourself, retirement saving has a superpower most employees never touch: the solo 401k. It is an ordinary 401(k) plan shrunk down for a business of one, and because you play two roles — the employee who defers salary and the employer who shares profits — you can stash far more than an IRA ever allows. For 2026 that ceiling is $72,000. Here is how the plan works, who qualifies, the exact limits, and how it beats the alternatives.

MKD Editorial Team October 14, 2026 6 min read Figures checked 14 Oct 2026

Flat fintech illustration in deep teal and gold: a dark teal piggy bank with a gold retirement shield emblem, tall stacks of rising gold coins beside it, and a small one-person storefront desk with a striped awning, on a pale cream background. — Two roles, one plan: employee and employer contributions.

Key takeaways

A solo 401k covers a business owner with no full-time employees (a working spouse may join). You contribute as both employee and employer.
For 2026: $24,500 employee deferral, $72,000 combined cap. Age 50+ adds an $8,000 catch-up ($80,000 total); ages 60–63 get $11,250 ($83,250).
Employer profit-sharing: 25% of W-2 wages if incorporated, about 20% of net self-employment income if not.
At the same income it usually beats a SEP IRA for sole proprietors — our $120,000 example shows $24,500 of extra room.
Open the plan by December 31, 2026 to contribute for 2026; employer contributions can wait until your tax-filing deadline.

What a solo 401(k) is, and who qualifies

The IRS calls it a one-participant 401(k): an ordinary 401(k) plan that covers only you, or you and your spouse if they work in the business (the IRS eligibility page). Same 401(k) your friends have at big employers, minus the HR department.

Eligibility is wide: freelancers, consultants, sole proprietors, single-member LLC owners, S-corporation owners and partners all qualify. The one hard line is staffing — no full-time employees besides you (and a spouse). Hire a full-timer and the solo plan stops being compliant; you would need a regular 401(k) with nondiscrimination testing. You can even hold a solo 401k alongside a W-2 job’s 401(k): the $24,500 employee deferral is shared across every plan you touch in a year, but the $72,000 total cap applies to each plan separately.

2026 contribution limits: the numbers that matter

The IRS announced the 2026 figures in IR-2025-111, with full tables on its COLA page. A solo 401(k) follows ordinary 401(k) rules, so these are the numbers a one-person business works from:

Piece (2026)	Limit
Employee elective deferral	$24,500
Catch-up, age 50+	+$8,000 → $32,500 deferral
Catch-up, ages 60–63 (SECURE 2.0 “super” catch-up)	+$11,250 → $35,750 deferral
Employer profit-sharing	25% of W-2 wages, or about 20% of net self-employment income
Combined cap (employee + employer)	$72,000 ($80,000 at 50+; $83,250 at ages 60–63)
Compensation that counts	First $360,000

Two details that trip people up. Catch-ups sit outside the $72,000 — that is how a 55-year-old reaches $80,000. And only your first $360,000 of earnings count toward the percentage-based employer piece.

The worked example: a freelancer earning $120,000

Take Maya, a freelance designer netting $120,000 on Schedule C. Her plan compensation works out to $111,522.27 (profit minus half the $16,955.46 SE tax). The employer piece is roughly 20% of that — $22,304.45 — and she defers the full $24,500 as the employee. Total: $46,804.45, comfortably under the $72,000 cap.

A SEP IRA at the same income allows only the employer-style contribution — $22,304.45, full stop. The solo 401(k)’s employee deferral adds $24,500 of extra room the SEP does not have, and at a 22% bracket it trims about $5,390 off her tax bill.

Flat fintech illustration in deep teal and gold: a confident freelancer at a desk with a laptop, a large gold vault door opening behind them revealing glowing coin stacks, a teal shield with a checkmark floating above, on a pale cream background. — Two contribution channels in one plan — why it out-saves a SEP IRA.

Solo 401(k) vs SEP IRA vs SIMPLE IRA

All three plans serve the self-employed, but they suit different savers. The 2026 figures below come from the IRS cost-of-living tables:

Feature (2026)	Solo 401(k)	SEP IRA	SIMPLE IRA
Maximum total (under 50)	$72,000	$72,000	$17,000
Employee deferral	$24,500	None	$17,000
Catch-up at 50+	$8,000 ($11,250 at ages 60–63)	None	$4,000 ($5,250 at ages 60–63)
Employer piece	25% of wages / ~20% of net SE income	Up to 25% of compensation	Mandatory match or nonelective
Roth option	Yes, if the plan allows	No	Generally no
Loans	Yes, if the plan allows	No	No

The solo 401(k) wins for aggressive saving on moderate income, thanks to the deferral the SEP lacks. The SEP wins on simplicity — almost no administration.

The Roth solo 401(k) option

Many plans let you split the $24,500 deferral between pre-tax and Roth dollars — pay tax now, withdraw tax-free in retirement. Roth suits you when your current bracket is lower than you expect in retirement. One 2026 change: under SECURE 2.0, catch-ups for higher-earning savers aged 50+ must now be Roth (Bankrate’s solo 401(k) guide).

Deadlines: don’t miss these

Open the plan by December 31, 2026 — it must exist in the calendar year to accept that year’s contributions.
Employer profit-sharing can go in up to your tax-filing deadline — April 15, 2027 for 2026 (October 2027 with an extension).
Elective deferrals should be elected before year-end and deposited promptly.

Once the money is in, it still needs a job: see our investment strategies guide for how to put the contributions to work.

Loans and early withdrawals

If your plan allows it, you can borrow up to the lesser of $50,000 or half your vested balance, repaid within five years with interest going back into your account. Leave the business or default, and the balance can become a taxable distribution. Withdrawals before 59½ trigger income tax plus a 10% penalty, with narrow exceptions; Roth withdrawals are tax-free once the account is five years old and you are 59½.

Three mistakes that blow up solo 401(k)s

Double-dipping the deferral. The $24,500 limit follows you, not the plan. Max out a W-2 401(k) and nothing is left to defer into the solo plan.
Hiring a full-time employee. One full-time hire (besides a spouse) ends the “one-participant” status.
Skipping Form 5500-EZ. Once assets pass $250,000 at year-end, the IRS wants an annual filing — short form, steep penalties for ignoring it.

Try it yourself

Know your 2026 limits — now see what they are worth. Our retirement tools project what decades of contributions become.

Compare retirement planning tools

Sources & further reading

All 2026 figures from IRS announcements; plan mechanics from IRS and lender guides.

Internal Revenue Service — One-Participant 401(k) PlansThe IRS eligibility rules: who a solo 401(k) can cover, and what happens when the business grows.
Internal Revenue Service — 401(k) Limit Increases to $24,500 for 2026 (IR-2025-111)The official 2026 announcement: $24,500 deferral, $8,000 catch-up at 50+, $11,250 at ages 60–63.
Internal Revenue Service — COLA Increases for Dollar Limitations on Benefits and ContributionsThe full 2026 tables: $72,000 annual additions, SEP and SIMPLE limits, and the $360,000 compensation cap.
Bankrate — Solo 401(k): How It WorksA practitioner’s walkthrough of Roth options, loans and day-to-day plan mechanics.