The Solo 401(K): Is It Right for You?

Play Video


In 1919, after World War I, a young and eager cartoonist moved to Kansas City where he landed a job at the Kansas City Star. His job was to create cartoon illustrations for newspaper advertisements and articles. Now this young man, eager as he was, only lasted a short time before being fired. Now his boss cited that he lacked imagination and had no good ideas. Soon thereafter that young man, a young Walt Disney, moved out to Hollywood to start his own studio and chart his own course. 

As Steve Jobs famously said, the people who are crazy enough to think that they can change the world are the ones who do. Now what am I talking about? Most entrepreneurs are so consumed with realizing their dreams that they forget or don't spend enough time and care building a long-term retirement bucket that can have significant savings in taxes and in long-term value. Hi, I'm Ken Hargreaves and I have a master's degree in financial planning, am a certified financial planner, and president of WealthGen Advisors. And today I'm going to focus on the Solo 401k. 

The Solo 401k is a retirement vehicle for solo entrepreneurs. And today we're going to touch on the differences between a 401k and other retirement vehicles. We'll touch on the benefits of a Solo 401k and finally what professions would most greatly benefit from using one. Now a Solo 401k is exactly how it sounds. It's a 401k for a single person or single entrepreneur or business owner. So what's the difference between a 401k and a Solo 401k? Well first, the IRS says if you have any employees, you cannot contribute to a Solo 401k. But there's a caveat. 

If you're a Solo 401k if your spouse is also employed in the business, either as a co-owner, they do bookkeeping, or a little light dusting, you can still have a solo 401k and both spouses can contribute. The contribution amounts between a 401k and a solo 401k are virtually the same. The big difference is that because it's only you or your spouse, there are no special employment regulations that regulate multiple person 401ks. 

So the cost to run one is a lot less and in many situations, there's virtually no cost at all, depending on who you custody with. Second, how it's funded is pretty unique. As the owner of a solo 401k, you can fund it as both the owner and employee, allowing for a significantly higher contribution without having to match that to other employees like a 401k. In 2024, you can contribute up to $69,000 if you're under 50 years old or $76,500 if you're over. 

And remember, it has to be from earnings, but it's tax deductible. If you can compare that to an IRA, an IRA contribution is only $7,000 for somebody under 50 or $8,000 if they're over 50. Now, what professions benefit the most from utilizing a solo 401k? The most common are consultants, real estate agents, real estate developers, professional services like CPAs, attorneys, and medical practitioners, and even social media influencers or fitness trainers and coaches. 

As you can tell, the list is plenty and there are a ton of other retirement plan options as an entrepreneur to choose from. So is a solo 401k right for you? Well, it depends on a lot of factors. So I encourage you to reach out to a certified financial planner and a tax professional to find out if it is, or you can click the link below. So to those who are brave or even possibly crazy enough to go out on your own and start a business, I applaud you and wish you well.
you tremendous success.

Free Resources

Our Blog

Insightful articles that reflect our low-cost, "stay the course" investment philosophy.

Our Videos

Free videos that cover complex topics in an easy-to-digest explainer style.

Choose your advisor

Ken Hargreaves - Wealth ManagerKen Hargreaves - Wealth Manager

Ken Hargreaves

Founder, Wealth Manager
Shane Klemcke - Wealth ManagerShane Klemcke - Wealth Manager

Shane Klemcke

Wealth Manager