Your question: Can I contribute as both an employee and an employer?

Answer:

Yes. With a Solo 401(k), you can make contributions in two capacities. As the employee, you can contribute salary deferrals up to the IRS annual limit. As the employer, your business can also make a profit-sharing contribution, allowing for a much higher total annual contribution compared to traditional IRAs or SEP IRAs.

Explore other related topics below

  • Are there any fees to open or maintain the plan?

    At Global Advisers, there are no setup or maintenance fees. Our firm charges a transparent, asset-based management fee. Depending on your custodian and investment selections, additional fund expenses or transaction costs may apply.

  • What happens if I hire an employee?

    To make salary deferral contributions for the current tax year, the plan must be established by December 31. Employer profit-sharing contributions can typically be made up to your tax filing deadline, including extensions.

  • Are there any fees to open or maintain the plan?

    A Solo 401(k) is only for businesses with no full-time employees other than a spouse. If you hire eligible employees, your plan may need to be converted into a traditional 401(k), and additional compliance requirements would apply.

  • When do I need to open a Solo 401(k) plan?

    Yes. If your spouse earns income from the business, they can participate in the Solo 401(k) and make their own employee and employer contributions, effectively doubling the householdโ€™s contribution limits.

  • Can my spouse participate in the plan?

    Not initially. If your Solo 401(k) plan assets exceed $250,000 at the end of the plan year, you are required to file IRS Form 5500-SF annually. If assets remain below that threshold, no filing is required.

  • Do I need to file IRS Form 5500?

  • Is there a Roth option available with a Solo 401(k)?

    In many cases, yes. Some custodians allow Roth contributions within a Solo 401(k), which means you can contribute after-tax dollars and potentially withdraw earnings tax-free in retirement if qualified.

  • What are the tax benefits of a Solo 401(k)?

    Contributions are typically tax-deductible, which reduces your taxable income. Investment earnings grow tax-deferred until withdrawn in retirement. If your plan includes a Roth option, you can also make after-tax contributions that may be withdrawn tax-free under certain conditions.

  • Who is eligible to open a Solo 401(k)?

    A Solo 401(k) is available to self-employed individuals or business owners with no full-time employees other than a spouse. This includes sole proprietors, LLCs, S corps, and C corps. You must have earned income from the business and hold at least a 5% ownership stake.