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What Is the Contribution Limit for a Solo 401(k) Plan?

When you have a Solo 401(k), you are both the employer and the employee–allowing you to contribute up to $58,000 per year toward your future.

  • If you’re over 50 years of age, you can put an additional $6,500 toward your future, using catch-up contributions.
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Contribution limits for Solo 401(k) plans change from year to year to compensate for inflation, but they are generally much higher than other types of retirement savings accounts.

While you may only be able to save $6,000 or $7,000 with an IRA, you can set aside up to $58,000 for a Solo 401(k) in 2021. If you’re over 50 years of age, you can save an additional $6,500–or $64,500.

If you have a spouse working for your business, you can double the savings for your household, saving up to $116,000 or $129,000 (50+) a year for your retirement.

Solo 401(k) Contribution Limits for Employees

When you have a Solo 401(k), you are contributing as both an “employee” to the plan and the “employer” as well, since you are a self-employed business owner. For the employee portion, you can reserve the same $19,500 that participants of a large employer-sponsored plan are allowed to save.

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2021 Solo 401(k) Contribution Limits for Employers

As an employer, you are allowed to contribute:

  • Up to 25% of gross income as a profit-sharing contribution IF your business is a “corporation.”
  • Up to 20% of net income IF your business is a “sole proprietorship” or “partnership” like an LLC.
  • The total amount of employer/employee contributions cannot exceed $58,000 in 2021.

Net self-employment income is calculated by subtracting your business income minus half your self-employment tax. Since the contributions are made with pre-tax dollars, your taxable income is effectively lowered, which helps cut your tax bill. The total maximum you can contribute as an employer is $38,500 in 2021.

Catchup Contributions for Solo 401(k)s

Catchup contributions are the same $6,500 across 401(k)s. You can make these contributions as long as you turn 50 by December 31, 2022. If your spouse works for the business and is over 50, that’s another $6,500 you can contribute toward the plan.

Spouse Contributions for Solo 401(k)s

To be eligible for a Solo 401(k), you must not have any full-time, regular employees. The one exception to the rule is a spouse. Your spouse may participate in the plan and contribute to the same limits you do. However, if your spouse participates in another 401(k) plan, their contributions may be limited.

What If You Have Multiple 401(k) Plans?

Some business owners set up Solo 401(k)s for their side jobs, but also participate in employer-sponsored 401(k)s. Keep in mind the upper limits are not JUST for the Solo 401(k), but for ALL 401(k) plans you contribute to.

Have Questions?

Ubiquity has been a provider of small business and Solo 401(k) plans since 1999. For a low monthly fee, we’ll monitor your contributions, ensure you don’t exceed the maximum, and answer any questions you may have about investment options or other issues related to your retirement savings. Once your account reaches $250,000, you’ll need to fill out Form 5500 with the IRS – another task we handle on your behalf.

Start saving today with Ubiquity and take advantage of industry-low, flat monthly rates, and no additional add-on fees!

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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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© 2021 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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