What Is a Solo 401(k)? A Business Owner’s Guide to Smarter Retirement Planning

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Ever feel like planning for retirement is just one more thing on your never-ending to-do list as a business owner? You’re not alone. When you’re running a business, managing retirement savings often gets pushed aside. But here’s the reality—a Solo 401(k) could be one of the smartest financial tools to help you reduce taxes and grow your wealth faster.

If you’re self-employed or run a business without full-time staff, this retirement plan was made for you. At Insogna CPA, we help business owners just like you simplify complex financial strategies—so you can focus on your business while we help you secure your future.

Let’s break down exactly what a Solo 401(k) is, why it matters for business owners, and how you can start using it to your advantage.

So, What Exactly Is a Solo 401(k)?

A Solo 401(k) is a retirement savings plan designed specifically for self-employed entrepreneurs or business owners with no employees (other than a spouse).

It works a lot like the 401(k) plans you might remember from a corporate job—but with some powerful differences designed for solo business owners.

The Big Perks:

  • Contribute More: You can contribute as both the employee and employer, which means higher savings potential.
  • Cut Your Taxes: Contributions can reduce your taxable income.
  • Invest Your Way: Choose from stocks, mutual funds, and even real estate.
  • Spouse Participation: If your spouse works for your business, they can contribute too!

It’s flexible, powerful, and a must-know tool if you’re serious about reducing your tax bill while saving for retirement.

Do You Qualify for a Solo 401(k)?

Wondering if you can use a Solo 401(k)? The eligibility requirements are simple:

  • You’re self-employed with no full-time W-2 employees (except your spouse).
  • You operate as a sole proprietor, LLC, S Corp, or C Corp.
  • You want to save for retirement while lowering your tax bill.

If you’re making income on your own—whether as a freelancer, consultant, or business owner—you likely qualify.

However: If you hire non-spouse full-time employees, you’ll need to explore traditional 401(k) options instead.

How Much Can You Contribute? (More Than You Think!)

Here’s where a Solo 401(k) really shines compared to other retirement plans.

You can contribute twice—once as an employee and again as the employer.

As of 2023:

  • Employee Contribution: Up to $22,500 (or $30,000 if you’re over 50).
  • Employer Contribution: Up to 25% of your net self-employment income.
  • Total Possible Contribution: Up to $66,000 (or $73,500 for those over 50).

Example for a Business Owner Earning $100,000:

  • Employee Contribution: $22,500
  • Employer Contribution: $25,000 (25% of net earnings)
  • Total Saved: $47,500 in tax-advantaged retirement savings!

Pro Tip: The higher your income, the more you can save—and lower your taxable income.

How a Solo 401(k) Saves You Money on Taxes

Let’s talk about the part every business owner cares about—saving money on taxes.

A Solo 401(k) lets you reduce your taxable income, which can mean thousands of dollars saved each year.

Here’s how it works:

Option 1: Traditional Contributions (Pre-Tax)

  • Contributions are made before taxes.
  • Reduces your taxable income this year.
  • You’ll pay taxes when you withdraw during retirement.

Option 2: Roth Contributions (After-Tax)

  • Contributions are made after taxes.
  • No tax savings now, but…
  • Tax-free withdrawals in retirement, including growth!

Example:

If your business earns $150,000 and you contribute $50,000 into a Solo 401(k):

  • Your taxable income drops to $100,000.
  • This could save you thousands in taxes today while you build wealth for the future.

At Insogna CPA, a top-rated Austin Texas CPA firm, we help you structure your Solo 401(k) contributions to maximize both immediate tax savings and long-term wealth growth.

Solo 401(k) vs. Other Retirement Plans—Which Is Best?

You might be wondering how the Solo 401(k) stacks up against other retirement plans like the SEP IRA or Traditional IRA.

Feature

Solo 401(k)

SEP IRA

Traditional IRA

Who Qualifies?

Self-employed, no staff

Self-employed

Anyone with income

Contribution Limit?

$66,000 ($73,500 if 50+)

$66,000

$6,500 ($7,500 if 50+)

Employer Contribution?

✅ Yes, up to 25%

✅ Yes, up to 25%

❌ No

Catch-Up Contributions?

✅ Yes ($7,500 for 50+)

❌ No

✅ Yes ($1,000 for 50+)

Roth Option?

✅ Yes

❌ No

✅ Yes

Key Takeaway: If you’re self-employed and want higher contribution limits with more tax flexibility, the Solo 401(k) beats most other options.

How to Set Up a Solo 401(k) (Without the Headache)

Setting up a Solo 401(k) might sound complicated, but it doesn’t have to be—especially when you have the right guidance.

Here’s how we help at Insogna CPA:

Step 1: Confirm Eligibility – We’ll review your business structure and income to ensure you qualify.
Step 2: Customize Your Plan – Choose between pre-tax and Roth options to match your goals.
Step 3: Handle Setup – Our team will establish your Solo 401(k) plan and prepare all necessary paperwork.
Step 4: Maximize Contributions – We’ll help you determine the ideal contribution amounts based on your income.
Step 5: Keep You Compliant – If your account balance exceeds $250,000, we’ll ensure proper Form 5500-EZ filing.

Why Business Owners Trust Insogna CPA

At Insogna CPA, we go beyond tax prep—we’re here to help you build lasting wealth through smart financial strategies.

🔹 Specialized in Small Business Retirement Planning
🔹 Personalized Tax Strategies Tailored to Your Business
🔹 Ongoing Compliance Support
🔹 Deep Expertise as a Leading Austin CPA Firm

We don’t just help you save on taxes this year—we help you build a financial legacy for the years ahead.

Ready to Build Wealth and Save on Taxes?

Solo 401(k) can be your secret weapon for reducing taxes and growing long-term wealth—but only if it’s set up the right way.

Let Insogna CPA, your trusted small business CPA in Austin, TX, guide you every step of the way.

👉 Get started today—contact Insogna CPA for a personalized Solo 401(k) strategy!

Jyn Ortizano