Retirement Plans for Solo Entrepreneurs
A guide to maximize your retirement savings up to $73,500 for solo entrepreneurs
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The Langan Financial Group will take their time to learn your goals and help you build a plan that suits your needs.
It is not a cookie cutter system that requires you to fit into a limited number of options.
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Bob, Alex, and their team inspire confidence.
Knowledgeable, personable, service oriented, and highly responsive.
My wife and I feel we are in very good hands!
Owner, Richard Beck LLC
What is a Solo 401(k) Plan?
A Solo 401(k) is a retirement plan solution for self-employed entrepreneurs.
The IRS refers to this type of plan as a one-participant 401(k) and it works very similarly to a standard 401(k) with profit-sharing.
This plan design is only permissible if the business has no employees (there is one exception we'll get to later).
If the business employs any other workers, they will need to look at other retirement plan options such as:
- SEP IRA
- 401(k)
How to Set Up a Solo 401(k) Plan
The only eligibility requirement for a Solo 401(k) is the participant must be a business owner without any employees (with one exception in the contribution section).
In order to open a Solo 401(k), the employer will need an Employer Identification Number (EIN). The owner will need to review the provisions they want to be included in the plan and incorporate them into the plan document.
A Form 5500 is not required for a Solo 401(k) if the plan assets are under $250,000. Once that threshold is reached the Form 5500 – Short Form will need to be completed annually.
How a Solo 401(k) Plan is Taxed
A Solo 401(k) plan could be taxed as a traditional 401(k), reducing taxable income in the year contributions are made. When this is distributed, the participant will pay taxes on the distribution as ordinary income.
The sponsor could also elect for Roth Solo 401(k) contributions, which do not offer an immediate tax deduction but allow for tax-free distributions in retirement.
What are the Solo 401(k) Contribution Limits?
In 2023, the total contribution limit for a Solo 401(k) is $66,000, with the allowance of a $7,500 catch-up contribution when the participant is over the age of 50. This is the total contribution limit for employee and employer contributions.
As the employee, $22,500 (or 100% of compensation, whichever is less) can be contributed to the plan. As the employer, additional profit-sharing contributions can be made. These contributions are up to 25% of compensation.
There is one exception to the no-employees rule, if the spouse of the entrepreneur earns income from the business, they can contribute up to $22,500 (plus the catch-up contribution if over 50). The employer may then make a contribution of up to 25% of compensation for a profit-sharing contribution.
3 Benefits of a Solo 401(k) Plan
1. Customizable Investment Options
A Solo 401(k) plan can have customizable investment options because the plan sponsor is the only participant. They can be any 401(k) acceptable investment.
In a normal 401(k), they may be limited to a fund lineup, but since there is only one participant the fund lineup may be customized to the owner’s preference.
2. Flexible 401(k) Loan Options
3. Minimal Administration Needs
Since a Solo 401(k) plan was created for freelancers, it has minimal paperwork compared to other 401(k) plans aside from the paperwork needed to begin the plan. This is to assist a smaller company with the burden associated with running a retirement plan.
What are the Cons of a Solo 401(k) Plan?
A Solo 401(k) will have the same downsides as a traditional 401(k), such as the penalties associated with withdrawing funds before 59 ½.
Once the plan is established, it will still fall to the employer to ensure the plan is in compliance with all rules and regulations. When the plan reaches over $250,000 in assets, Form 5500 must be filled out each year.
However, the financial advisor can help oversee compliance for the employer.
Our Solo 401(k) Advisors
If you are considering a Solo 401(k), Langan Financial Group is a fantastic option to help you achieve your retirement plan goals.
In order to strive to provide the best solo 401(k) option, we take a collaborative and engaging approach with employers to align the plan's design with the owner's financial goals.
We provide:
- Regularly scheduled plan reviews
- Regularly scheduled plan benchmarks
- Investment policy statement reviews
- One-on-one financial planning support
Our Solo 401(k) Free Benchmark
Our Solo 401(k) provider services focus on helping your employees better prepare for retirement.
In addition, we will benchmark business 401(k) plans to help ensure it is performing to the best of its ability. We will compare your solo 401(k) plan against other options available.
This free retirement plan review will:
- Review plan fees
- Review vendor services
- Review participant fees
- Review ERISA compliance
- Evaluate portfolio performance
Get started today
Contact Us Today
Chat with a Solo 401(k) Advisor
Give us a call at 717-288-1880 to see how our local advisors can help with your retirement plans.
Or visit our solo 401(k) advisor contact page to fill out an inquiry.
FREE Benchmark Comparison Services
Financial Advisor Locations:
Camp Hill, PA Financial Planning Office
York, Pa Financial Planning Office
Harrisburg, PA Financial Planners
Communities Served:
Langan Financial Group, LLC ("Langan Financial Group" or "LFG") is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. LFG may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
Important information about our firm is on our Disclosures page. You can review our registration and disciplinary history on the SEC's Investment Adviser Public Disclosure (IAPD) website and, for brokerage registrations, on FINRA's BrokerCheck. This website is for general information only. It is not legal, accounting, or tax advice. Please talk with your own legal or tax professional about your situation. Important information about our firm is on our Disclosures page.
You can review our registration and disciplinary history on the SEC's Investment Adviser Public Disclosure (IAPD), website and, for brokerage registrations, on FINRA's BrokerCheck.
This website is for general information only. It is not legal, professional about your situation.
© Langan Financial Group
Harrisburg, PA Office
Address: 1863 Center St, Camp Hill, Pa 17011
Phone: 717-288-1880
York, PA Office
Address: 3405 Board Rd, Suite 200, York, Pa 17406
Phone: 717-773-4085
