The Power of the Solo 401(k): A Retirement Tool Many Business Owners Overlook
In today’s world, there are more ways than ever to invest and save for retirement. Most people are familiar with pensions, IRAs, and traditional 401(k)s - but far fewer have heard of one of the most powerful retirement tools available to small business owners: the Solo 401(k).
To understand why the Solo 401(k) exists—and who benefits most—we need to take a quick step back to 1981.
A Brief History: From 401(k)s to Solo 401(k)s
What a time to be alive in Manistee! Bars on every corner, factories like Hardy Salt humming along, and Armado’s pizza lighting up its arcade with classics like Galaga and Pac-Man.
While life was unfolding in our small town, something major was happening in the world of retirement planning: the 401(k) was introduced, forever changing the way we save for retirement.
But there was one big challenge: traditional 401(k)s were designed for employees of larger organizations—not solo business owners. That meant self-employed individuals had limited ways to save meaningfully for their future.
That changed in 2001, when the Solo 401(k) (also known as the Individual 401(k)) was created to give sole proprietors and self-employed workers a flexible, high-contribution retirement strategy.
Why Solo 401(k)s Are So Powerful
Today, the Solo 401(k) is widely considered one of the strongest retirement planning vehicles available for people with self-employed income. It offers unmatched contribution flexibility and major tax advantages.
It is ideal for professions such as:
- Realtors
- Contractors
- Online Vendors
- Gig-economy workers
- Freelancers
- Consultants
- And many others
High Contribution Limits
Solo 401(k) participants can contribute as both employee and employer:
- Employee contribution: Up to $23,500 in 2025
- Employer contribution: Up to 25% of business earnings, capped at $46,500 in 2025
This combination allows many business owners to save significantly more than they could with a SEP IRA, SIMPLE IRA, or standard IRA. Why would this matter? Nowhere else do you get this level of flexibility, tax efficiency, and contribution potential - all within a plan designed specifically for small business owners with no full-time employees (other than a spouse).
What a Solo 401(k) Can Do for Your Future
A Solo 401(k) can open the door to a level of retirement readiness many business owners never thought possible. For those who qualify, it can accelerate long-term saving, reduce taxable income, and provide the kind of flexibility that traditional retirement plans simply do not offer.
Is a Solo 401(k) Right for You?
If you're earning self-employed income, even from a side business, you may qualify. And if you do, this plan could dramatically improve your retirement trajectory.
If you’d like to learn more - or determine whether a Solo 401(k) fits your situation - our team is here to help. Reach out through our website or call us at 231-723-8373, and one of our advisors would be happy to walk you through your options.
Solo 401(k) contribution limits 2025 and 2026 | Fidelity
One Participant 401k Plans | Internal Revenue Service
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