What is a Solo 401K: Your Success Guide in 2023

Andrew C. McGuire

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A Solo 401(k) is an ideal retirement savings plan designed for self-employed individuals or small business owners. With generous contribution limits and tax advantages, a solo 401(k) can help you protect your wealth from inflation and recessionary periods. Whether you’re just getting started with investing or looking to increase the security of your existing investments, understanding the benefits of a solo 401(k), how to open one, and what its contribution limits are will provide you with more insight into this powerful financial tool. Just before we launch into the Solo 401 k plan, listen to quarterback Joe Montana as he shares his view on Augusta Precious Metals and why his financial team tagged the precious metals company as the perfect choice for anyone looking to invest funds.

What is a Solo 401(k)?

A Solo 401(k) is a great retirement savings option for self-employed individuals and small business owners, allowing them to save up to $76,000 per year in tax-deductible contributions. A Solo 401K provides the same tax advantages as a traditional 401(k), but with higher contribution limits and fewer administrative requirements. It allows you to save more money for retirement than other types of accounts, such as IRAs or SEP IRAs. 

Let's check out the benefits of this type of plan.

Benefits of a Solo 401(k)

It offers several advantages over other retirement accounts, making it an attractive option for individuals looking to protect their wealth from inflation and recession.


Higher Contribution Limits

One of the main benefits of a Solo 401(k) is its higher contribution limits than traditional IRA or employer-sponsored plans. For 2023, you can contribute up to $19,500 as an employee plus an additional 25% of your net earnings as an employer contribution (up to $57,000 total contributions). This allows you to save more money each year towards your retirement goals.


Cover Your Spouse

Another advantage of a Solo 401(k) is that it enables you to cover your spouse under the plan if they are employed by the same business or have earned income from self-employment activities. This means both spouses can take advantage of the tax savings associated with contributing pre-tax dollars into their own individual accounts within the same plan.


Tax Savings

Contributing pre-tax dollars into a Solo 401(k) provides potential tax savings on contributions and investment earnings in comparison to taxable investments such as stocks and bonds held outside of a qualified retirement account like this one. Additionally, any withdrawals taken after age 59 ½ may be eligible for preferential tax treatment depending on how long funds were held in the account prior to withdrawal.

A Solo 401(k) can be a brilliant way to protect your wealth and take advantage of tax-deferred growth. Next, we'll look at how to open a Solo 401(k). An additional benefit to the Solo 401 k plan is that there are no age or income restrictions.

Key Takeaway:

A Solo 401(k) is an attractive retirement plan for self-employed individuals and small business owners due to its higher contribution limits, ability to cover spouses, and potential tax savings. Benefits include:

• Up to $19,500 in employee contributions

• Additional 25% of net earnings as employer contributions (up to $57,000 total)

• Cover spouse under the same plan

• Tax savings on contributions & investment earnings

How to Open a Solo 401(k)

Opening a Solo 401(k) is relatively simple and can be done in just a number of steps. First, you'll need to select an administrator or custodian for your plan. There are many options available, so make sure to do your research and find the one that best fits your needs. Once you've chosen an administrator, complete the necessary paperwork and submit it to them.

Next, set up contributions from both yourself and any employees who may be part of the plan. You can contribute as much as $19,500 per tax year ($26,000 if over 50 years old), plus employer contributions of up to 25% of compensation (up to $57,000). This money will then be invested in assets that meet your retirement goals such as stocks, bonds, or mutual funds.

Finally, keep track of all transactions related to the account including deposits and withdrawals throughout the year. Make sure you also file Form 5500-EZ with the IRS each year by April 15th following tax season for reporting purposes.

Overall, opening a Solo 401(k) is not complicated but does require some research into what type of plan works best for you and how much money you want/can contribute annually. With proper planning, this type of retirement savings vehicle can help protect your wealth from inflation while providing additional tax benefits during retirement age.

Opening a Solo 401(k) is an effective way to protect your wealth from inflation and recession, so be sure to take advantage of the contribution limits available for this type of retirement plan.

Solo 401(k) Contribution Limits

Solo 401(k) Contribution Limits are an important part of any retirement plan. The 2023 contribution limit for a Solo 401(k) is $19,500 ($26,000 if you are age 50 or older). This includes both employee contributions (up to 100% of compensation or $19,500/year whichever is less) and employer contributions (up to 25% of compensation).


Employee Contributions

Employees can contribute up to 100% of their salary or wages into the Solo 401(k), with a maximum annual contribution limit of $19,500 in 2023. For those over 50 years old, there is an additional “catch-up” contributions that allow them to contribute an extra $6,500 annually. Employee contributions should ideally be completed by the tax-filing deadline for the year.


Employer Contributions

Employers may also make contributions on behalf of employees as long as they do not exceed 25% of the employee's total salary and wages for the year. This means that employers can contribute up to $58,000 per year in addition to what employees have contributed themselves ($37,500 +$20,500 =$58K). An employer can make employer profit-sharing contributions plus additional after-tax payments.


Tax Benefits

Both employee and employer contributions are tax deductible which helps reduce your taxable income while saving for retirement at the same time. Additionally, all earnings within the account grow tax-free until withdrawn during retirement when you will pay taxes at ordinary income rates.



With a Solo 401(k), you have flexibility when it comes to how much money you want to save each year depending on your financial situation and goals. You can choose from various investment options such as stocks & bonds mutual funds ETFs real estate investments precious metals etc., allowing you to customize your portfolio to meet your needs best.

A Solo 401(k) offers several benefits including high contribution limits, flexible investment options, potential tax savings, and no administrative fees like those associated with traditional IRAs or other qualified plans. Ultimately this makes it an attractive choice for self-employed individuals looking to maximize their retirement savings while minimizing taxes owed now or in the future.

Key Takeaway:

A Solo 401(k) offers high contribution limits, flexible investment options, potential tax savings, and no administrative fees - making it an attractive choice for self-employed individuals looking to maximize their retirement savings.


It offers tax advantages, high contribution limits, and the ability to cover your spouse under the same plan. With careful planning, you can use a Solo 401(k) to maximize your retirement savings while taking advantage of its unique benefits. Make sure you understand all of the details before opening a Solo 401(k), as it could be an invaluable tool in protecting your wealth for years to come.


How does a Solo 401k plan work?

It allows them to make contributions as both an employer and employee, allowing them to save more than with other retirement plans. Contributions are made pre-tax, reducing taxable income and potentially lowering taxes owed. Earnings grow tax-deferred until withdrawn in retirement when they’re taxed at ordinary income rates. Withdrawals before age 59 1/2 may incur penalties unless used for certain purposes such as medical expenses or buying a first home.

What is the difference between a 401k and a Solo 401k?

A 401k is a retirement savings plan offered by employers to their employees. It allows them to save and invest pre-tax money for retirement, with the employer often matching contributions up to a certain percentage. A Solo 401k is similar in that it allows individuals who are self-employed or own small businesses to set aside pre-tax income for retirement. However, unlike a traditional 401k, there is no employer match and the individual can contribute both as an employee and an employer. Additionally, Solo 401ks have higher contribution limits than traditional 401ks.

Who qualifies for a Solo 401k?

It allows them to make both employer and employee contributions, up to $19,500 in 2023 ($26,000 if over age 50). Contributions are tax-deductible and earnings grow tax-deferred until withdrawn. Withdrawals before the age of 59 1/2 may be subject to an additional 10% penalty tax.

Is a Solo 401k a good idea?

A Solo 401k can be a great way to protect your wealth from inflation and recession. It allows you to contribute up to $19,500 per year (or $26,000 if over 50) of pre-tax income into an account that is tax-deferred until retirement. Additionally, it provides the flexibility of investing in stocks, bonds, mutual funds, and even precious metals like gold or silver. With its low fees and high contribution limits, a Solo 401k can be an excellent option for those looking for long-term wealth protection strategies.

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