Can You Have Your Own 401k Without an Employer?

You can establish and contribute to your own 401(k) plan without a traditional employer through a Solo 401(k), also known as an Individual 401(k). These plans are designed for self-employed individuals and small business owners who do not have any employees. The structure allows the owner to make contributions as both an “employee” and an “employer,” providing a tool for retirement savings. This framework is recognized by the Internal Revenue Service (IRS) and follows a specific set of rules and contribution limits.

The Solo 401(k) Explained

A Solo 401(k) is a qualified retirement plan for a business owner with no employees, other than a spouse. The plan’s principle is that the owner acts as both the employee saving for retirement and the employer sponsoring the plan. This dual capacity allows for the plan’s contribution potential and combines features of a traditional 401(k) with the flexibility needed by self-employed professionals.

Eligibility requires self-employment activity, which can range from freelance work to running a single-member LLC or a partnership. The defining rule is that the business cannot have any full-time employees other than the owner and their spouse. If a business owner hires an employee who is over 21 and works more than 1,000 hours a year, the business generally becomes ineligible for a Solo 401(k).

This plan is available to various business types, including sole proprietorships, partnerships, and corporations. Eligibility is based on the absence of non-owner employees, not the legal structure of the business. This makes it an accessible option for entrepreneurs seeking a tax-advantaged retirement account without the complexity of a traditional corporate 401(k).

Understanding Contribution Rules

The contribution structure of a Solo 401(k) allows for savings from two sources. As the “employee,” the business owner can make elective deferrals of up to 100% of compensation, not to exceed $23,500 for 2025. This IRS limit is subject to cost-of-living adjustments. Individuals age 50 and over can make additional catch-up contributions: $7,500 for those aged 50 to 59, and a higher amount of $11,250 for those aged 60 through 63.

As the “employer,” the business can make a profit-sharing contribution. This is limited to 25% of compensation. For self-employed individuals, compensation is defined as earned income, which is gross self-employment income minus one-half of the self-employment tax and the employer’s 401(k) contribution.

The IRS sets an overall limit for combined employee and employer contributions into the plan. For 2025, this total limit is $70,000, not including any catch-up contributions which can be added on top. The total contribution cannot exceed the individual’s earned income for the year. This dual-contribution mechanism allows for a higher savings rate than is possible with a traditional or Roth IRA.

Many Solo 401(k) plans also offer a Roth option for the employee contribution. This allows the owner to designate elective deferrals as Roth contributions, which are made with post-tax dollars. While they do not reduce current taxable income, qualified distributions in retirement are tax-free. The employer profit-sharing portion must be made on a pre-tax basis.

Preparing to Open Your Account

Before establishing a Solo 401(k), you must first obtain an Employer Identification Number (EIN) from the IRS. An EIN is required because the plan is established under a business entity, even for a sole proprietorship operating under your own name. You can apply for an EIN for free on the IRS website, and the process is typically immediate.

The next step is to choose a financial institution to act as the plan provider. Many brokerage firms and mutual fund companies offer Solo 401(k) plans. When comparing providers, consider factors such as:

• Investment options
• Account fees
• Customer service
• The ease of their platform

Finally, you will need to make decisions about your plan’s features. A common decision is whether to include a Roth contribution option. Another feature to consider is a loan provision, which would allow you to borrow from your account balance under specific IRS rules. Making these decisions beforehand will streamline the process of completing the plan adoption paperwork.

Steps to Establish and Fund Your Plan

Once you have selected a provider, you will complete the paperwork to formally establish the plan. This involves two main documents: a plan adoption agreement and a new account application. The plan adoption agreement is the legal document that creates the retirement trust, where you will specify plan features. The account application opens the investment account that will hold the plan’s assets.

Meeting deadlines is an important part of managing a Solo 401(k). To make employee contributions for a tax year, your plan must be officially established by December 31 of that year.

The deadline for funding the plan is more flexible. Both employee and employer contributions can be made up until your business’s tax filing deadline for that year, including any extensions. For example, a sole proprietor could make contributions for the 2025 tax year as late as October 15, 2026, if they file for an extension.