You don’t need a corporate ladder to build serious retirement wealth. A Solo 401(k) gives you the power to create your own path to long-term financial freedom, all on your own terms.
A Solo 401(k), or individual 401(k), is a retirement plan for self-employed individuals or business owners without full-time employees, other than a spouse. This includes freelancers, consultants, independent contractors, and real estate investors using an LLC or similar structure.
Think of it like a traditional 401(k), but custom-built for a one-person show. You get the same tax advantages, the ability to invest in a wide range of assets, and generous contribution limits, all without the red tape of a large company plan.
If you're earning self-employment income and want to take charge of your retirement savings, this could be your most powerful tool.
What sets the Solo 401(k) apart is that it allows you to contribute in two capacities: as both the employee and the employer. This unique setup enables you to contribute far more than an IRA would allow, especially in higher-income years.
You can tailor the plan to your financial goals. Want tax deductions now? Make pre-tax contributions. Want tax-free withdrawals later? Use the Roth option if your plan offers it. Either way, the flexibility gives you more control than traditional employer-sponsored plans.
You’re essentially wearing two hats, and each role gives you a way to build wealth inside your retirement account. That dual role is what makes this plan so effective for proactive, self-employed investors.
The IRS allows two types of contributions to a Solo 401(k):
Combined, you can contribute up to $69,000 in 2025, or $76,500 if you're eligible for catch-up contributions.
Example: If you’re a 42-year-old consultant earning $100,000 in net business income, you could contribute:
That brings your total annual contribution to $41,587. That’s nearly six times more than the contribution limit on a traditional or Roth IRA, giving you a serious edge in building retirement savings quickly.
Setting up a Solo 401(k) may sound intimidating, but the process is simpler than most people expect, especially when using a brokerage or provider familiar with this type of account.
You must have self-employment income and no full-time employees except your spouse. Eligible business structures include sole proprietorships, single-member LLCs, S corporations, and side hustles with 1099 income.
Popular Solo 401(k) providers include:
Some offer Roth contributions, loan features, or checkbook control. Pick the one that fits your investing style.
You’ll fill out a short plan document and obtain an Employer Identification Number (EIN) from the IRS. This officially establishes your Solo 401(k) and allows you to open an account under your business.
Once your plan is open, you can start making contributions from your business income. Be sure to keep track of how much you contribute as an employee versus your employer, as this affects your taxes.
If you want help deciding how a Solo 401(k) fits into your long-term investing plan, the RockStep Capital Learning Center offers clear, beginner-friendly articles and e-books on building passive income, investing in commercial real estate, and creating tax-efficient retirement strategies. You can also check out the RockStep Capital YouTube channel for short videos, property tours, and practical advice from CEO Andy Weiner.
You can contribute anytime during the year or up to your business’s tax filing deadline, including extensions. This is particularly beneficial for entrepreneurs and investors with fluctuating income.
There are two funding components:
Example: A real estate consultant earning $150,000 in net profit could contribute well over $50,000 to their Solo 401(k), depending on their age and specific tax situation.
Think of funding the account like filling two separate buckets. Your personal income fills one, and your business profits fill the other. Together, they build a strong foundation for tax-advantaged growth.
The Solo 401(k) is designed for long-term savings, but there are ways to access your money if needed.
After reaching 59½, you can begin taking distributions from your Solo 401(k). Pre-tax funds will be taxed as ordinary income. Roth funds, if held for at least five years, can be withdrawn tax-free.
Withdrawals before age 59½ may be subject to a 10% early withdrawal penalty and income taxes, unless you meet specific exceptions such as disability or hardship.
Some Solo 401(k) plans allow loans of up to $50,000 or 50% of your account balance, whichever is less. Loans must be repaid within five years with interest. This option can provide temporary liquidity without creating a taxable event.
Even with its many advantages, the Solo 401(k) has a few limitations to keep in mind:
These drawbacks don’t outweigh the benefits for most investors, but they’re worth considering as you shape your long-term financial plan.
Many real estate professionals and passive income investors don’t have access to a traditional 401(k), especially if they’re running small businesses or investing independently.
The Solo 401(k) fills that gap by offering high contribution limits, tax-deferred or tax-free growth, and investment control. Some providers even allow you to invest in real estate, syndications, or REITs directly through your Solo 401(k).
For self-employed professionals and income-focused investors, the Solo 401(k) is a retirement engine that puts you in the driver’s seat.
You get to decide how much to contribute, what to invest in, and how to manage distributions later in life. And with generous contribution limits, the long-term compounding potential can be substantial.
If you're serious about building wealth outside of the traditional employment system, the Solo 401(k) gives you a structure to grow and protect that wealth without giving up control.