Where Should I Really Open a Solo 401(k)? – Avoid This Mistake + FAQs

You can open a Solo 401(k) at major brokerage firms like Fidelity, Charles Schwab, Vanguard, E*TRADE, Merrill Edge, or through specialized Solo 401(k) providers that cater to self-employed individuals’ needs and investment goals.

This choice will depend on the features you require (such as low fees, investment options, Roth availability, or loan provisions) and how hands-on you want to be with plan administration.

Selecting the right institution is crucial for maximizing your retirement savings and ensuring compliance with IRS rules while minimizing costs.

What You’ll Learn in This Article:

• The top financial institutions and online platforms where you can open a Solo 401(k)
• How major providers compare on fees, investment choices, Roth options, and loan features
• The pros and cons of opening a Solo 401(k) at brokerages vs. specialized providers
• Key factors to consider (tax benefits, state-specific rules, plan features) when choosing where to open your Solo 401(k)
• Common mistakes to avoid when setting up and managing a Solo 401(k) as a self-employed individual

Major Brokerage Firms Offering Solo 401(k) Accounts (Big Names Revealed)

Large, well-known brokerage firms and banks are among the most popular places to open a Solo 401(k). These providers typically charge no setup or annual maintenance fees and offer a wide range of investment options (stocks, ETFs, mutual funds, bonds). Below are some of the top brokerage and fund company Solo 401(k) providers and what they offer self-employed savers:

Fidelity – Feature-Rich Solo 401(k) with No Annual Fees

Fidelity Investments offers a Solo 401(k) plan with no account setup fees or ongoing administrative fees, making it very cost-effective. You get access to Fidelity’s extensive investment platform, including thousands of mutual funds (many with no transaction fee), stocks, ETFs, and bonds. Roth Solo 401(k) contributions are supported, allowing you to contribute after-tax for tax-free growth if you choose.

Fidelity’s platform has robust online tools and customer service, though one limitation is that 401(k) loans are not permitted under its plan – so you cannot borrow from your Solo 401(k) balance at Fidelity. Contributions must be manually initiated (via electronic transfer or check), as the plan doesn’t currently support automatic recurring contributions tied to income.

Fidelity is a top choice if you want low costs and a broad range of traditional investments for your Solo 401(k).

Charles Schwab – Low-Cost Solo 401(k) for Index Investors

Charles Schwab is another major brokerage with a no-fee Solo 401(k) offering. Schwab’s plan provides access to a wide selection of investments, including the popular low-cost index funds and ETFs Schwab is known for, as well as individual stocks and bonds.

Like Fidelity, Schwab now supports both traditional (pre-tax) and Roth Solo 401(k) contributions, giving you flexibility in tax planning. All trading in stocks and ETFs is commission-free, and many mutual funds are available with no loads or transaction fees (especially through Schwab’s OneSource fund platform).

One caveat is that Schwab’s prototype Solo 401(k) does not allow plan loans, so if borrowing from your 401(k) is a feature you need, Schwab may not be ideal. Some users also note that making contributions can require a bit of paperwork (e.g., distinguishing employee vs. employer contributions when depositing checks). However, for a self-employed individual focused on low-cost investing and no account fees, Schwab’s Solo 401(k) is an excellent option.

E*TRADE – Solo 401(k) with Flexibility (Includes Loan Option)

ETRADE’s Solo 401(k) is popular for its flexibility and features. ETRADE (now part of Morgan Stanley) charges no setup or annual fees and offers a full range of investment choices: you can trade stocks, ETFs, mutual funds, bonds, and even options in your Solo 401(k) account.

Notably, ETRADE’s plan permits loans, meaning you can borrow from your Solo 401(k) balance (up to the IRS-allowed limit) if your plan is set up for it. This feature sets ETRADE apart from some competitors that don’t allow 401(k) loans. Roth contributions are also supported, so you can decide between pre-tax and after-tax (Roth) contributions for your employee deferrals.

ETRADE’s online interface and trading tools are robust, appealing to more active traders or those who prefer managing their investments closely. One potential drawback to consider is that because of the platform’s breadth, you’ll want to be comfortable navigating the account setup process and executing trades yourself (though customer support is available). If you value having loan access and a trader-friendly platform for your Solo 401(k), ETRADE is a top contender.

Merrill Edge (Bank of America) – Solo 401(k) with Roth and Loan Features

Merrill Edge, the brokerage arm of Bank of America, offers an Individual 401(k) plan that integrates banking and investing conveniences. Merrill’s Solo 401(k) supports both traditional and Roth contributions, giving you tax flexibility.

A distinguishing feature is that Merrill allows plan loans, enabling you to borrow from your Solo 401(k) if needed (which not all brokers do). There are typically no administrative or setup fees for the basic Merrill Solo 401(k) plan, and you have access to a wide range of investment products including Merrill’s extensive selection of mutual funds, ETFs, and stocks (with $0 commissions on stock/ETF trades).

Merrill’s platform is convenient if you already bank with Bank of America or Merrill, as you can see your accounts in one place and transfer funds easily. On the downside, some of Merrill’s mutual funds may carry transaction fees or higher expense ratios if you venture beyond their no-fee list.

Additionally, while Merrill Edge provides solid customer service, its trading interface is more basic compared to standalone brokers (geared toward long-term investors rather than active traders). Merrill is a great choice if you want full Solo 401(k) features (including loans) and prefer an all-in-one banking/investing solution.

Vanguard & T. Rowe Price – Low-Cost Fund Solo 401(k) Plans (With Some Limits)

Vanguard and T. Rowe Price are renowned mutual fund companies that also offer Solo 401(k) plans, ideal for those who plan to invest primarily in funds from those families.

Vanguard’s Individual 401(k) plan is known for its ultra-low-cost investment options – you get access to Vanguard’s extensive lineup of index funds and target-date funds with rock-bottom expense ratios. There are no setup fees, and Vanguard’s brokerage platform now allows Roth Solo 401(k) contributions as well.

However, Vanguard’s plan has some notable limitations: it does not permit loans, and it historically restricted investment choices to a menu of Vanguard mutual funds (excluding ETFs and individual stocks).

Vanguard imposes a $20 annual fee per fund held if your account balance is under a certain threshold or if you’re not enrolled in e-delivery, which could add up if you hold many funds. This structure can make a Vanguard Solo 401(k) very cost-efficient for those sticking to a few core Vanguard funds, but less ideal if you wanted a multi-fund portfolio or non-Vanguard assets.

T. Rowe Price offers a similar Solo 401(k) program focused on its own mutual funds. T. Rowe Price’s plan has no initial setup fee and gives you access to their respected actively-managed funds and retirement target-date series. Like Vanguard, the trade-off is that your investment menu may be limited mostly to T. Rowe Price funds, and there is no loan feature.

Roth contributions at T. Rowe Price are allowed, which is a plus for flexibility. These fund-company Solo 401(k)s are excellent for buy-and-hold investors who want simplicity and low fund expenses, but if you need more investment variety or plan loan capability, you might lean toward a brokerage like those mentioned above.

Other Brokerage Options to Consider

In addition to the big names above, virtually all major investment platforms have Solo 401(k) offerings. TD Ameritrade had a popular Solo 401(k) (similar to Schwab’s) – it’s now under Schwab’s umbrella after their merger, but legacy TD users can still utilize their accounts.

T. Rowe Price, as mentioned, caters to fund investors. Some smaller brokerages and robo-advisors are starting to support Solo 401(k)s too. For example, Interactive Brokers has an Individual 401(k) option geared toward experienced investors (with access to global markets), and some advisory platforms like Betterment for Business or Vanguard Small Business services can set up Solo 401(k)s if you prefer a managed portfolio approach.

Additionally, many banks and credit unions offer Solo 401(k) plans through partnerships – for instance, Wells Fargo and Chase might provide plans (often administered by third parties like Ascensus or Fidelity on the back end). The key is that most well-known financial institutions in the U.S. have a way for owner-only businesses to open a Solo 401(k), so you likely can start one at your preferred bank or broker.

Next, we’ll look at specialized Solo 401(k) providers beyond the mainstream brokers, which can be useful for those seeking alternative investments or custom plan features.

Specialized Solo 401(k) Providers for Enhanced Flexibility and Investments

While big brokerages cover the needs of most investors, there are specialized Solo 401(k) providers that cater to self-employed individuals seeking more flexibility, alternative asset investments, or concierge-level plan services.

These providers often allow you to invest in assets beyond the stock market (such as real estate, private equity, precious metals, or cryptocurrency) and may support plan features like mega backdoor Roth contributions or rollovers that standard broker plans do not.

Typically, specialized platforms charge setup fees and/or annual fees for their services, as they provide custom plan documents and sometimes administrative support. Here are some notable specialized Solo 401(k) platforms:

Self-Directed Solo 401(k) Providers – Invest in Real Estate, Crypto, and More

If you want to use your Solo 401(k) to invest in non-traditional assets (for example, buying an investment property, funding a private startup, or even cryptocurrency), a self-directed Solo 401(k) provider is the way to go. Companies like MySolo401k Financial, Nabers Group (Solo401k.com), Sense Financial, and IRA Financial Group specialize in setting up Solo 401(k) plans with “checkbook control.”

This means they provide IRS-approved plan documents that appoint you (the business owner) as the trustee of your 401(k) trust, giving you the ability to write checks or wire money directly from the 401(k) for investments. With this power, you can invest in almost any asset class (as long as it’s not a prohibited transaction under IRS rules).

The benefit here is ultimate investment flexibility: real estate, tax liens, private loans, cryptocurrencies, and more are all on the table – far beyond what a mainstream brokerage allows.

Typically, self-directed plan providers charge a one-time setup fee (ranging from a few hundred up to a thousand dollars) which includes your plan adoption documents, and some charge a modest annual fee for ongoing support or document updates (often $100–$200/year, though some providers have no annual fee after the initial cost).

For example, MySolo401k Financial is known for a flat fee structure (a setup fee around $500-$600) and no ongoing asset-based fees, making costs predictable. Nabers Group offers a plan for a one-time fee (approximately $1,000) that includes lifetime document support.

These providers often include features like Roth Solo 401(k) sub-accounts and after-tax contribution support (enabling the mega backdoor Roth strategy), as well as loan provisions, since they customize the plan to include all allowable features. The trade-off is that you as the plan trustee are responsible for compliance – you must avoid prohibited transactions, keep good records, and ensure you follow contribution limits and any required reporting (like Form 5500-EZ when applicable).

If you’re a savvy investor who wants a truly self-directed retirement plan and are willing to take on a bit more administrative responsibility, these specialized Solo 401(k) providers offer capabilities that big brokerages cannot, albeit for an extra cost.

Turnkey Solo 401(k) Services – ShareBuilder 401k, Guideline, Ascensus, and More

Some providers offer a turnkey Solo 401(k) service, blending the ease of a brokerage with additional support and features. ShareBuilder 401k (associated historically with Capital One) is one such provider that has gained popularity. ShareBuilder 401k charges a manageable fee in exchange for handling all the setup paperwork, providing a selection of low-cost index funds (they often utilize ETFs or funds from Vanguard, Fidelity, and others), and even offering guidance on contribution strategies.

This kind of service is great for someone who wants a simple, guided experience and doesn’t mind paying a bit for the convenience. Another example is Ascensus – a large retirement plan administrator that now manages Vanguard’s individual 401(k) business and also offers Solo 401(k) plans through financial institutions.

Ascensus can provide a Solo 401(k) with full-service features like Roth contributions and loan capability, and you might access their plan via a local bank or advisor; fees can vary, but expect an annual maintenance fee for the added support.

For those who anticipate expanding their business (i.e., hiring employees in the future), it may be worth considering a provider that can scale your Solo 401(k) into a regular 401(k) plan later.

Companies like Guideline, Human Interest, and ForUsAll are fintech-oriented 401(k) providers designed for small businesses. They do offer plans for owner-only businesses as well, often with a monthly fee structure. For example, Guideline has a flat monthly fee for its 401(k) platform—while it’s more cost than a free Solo 401k at a broker, it includes all administration, payroll integration, and can seamlessly accommodate new employees if your business grows.

ForUsAll, in particular, has started marketing a Solo 401(k) product that allows automated contributions, easy payroll links, and even a cryptocurrency window via Coinbase for those interested in adding crypto to their retirement mix. These turnkey providers handle the compliance and paperwork heavy-lifting; you pay for their service, but in return you spend less time managing the plan. If you value hands-off administration or know you’ll need to transition to a larger 401(k) plan down the road, opting for a specialized platform like these can save headaches later on.

Cost and Feature Trade-offs with Specialized Providers

When considering specialized Solo 401(k) providers, weigh the costs versus the benefits. You will typically pay an upfront fee or ongoing fees, but you might receive personalized consulting, custom plan features (like in-plan Roth conversions, after-tax contributions, or tailored investment support), and broader asset choices.

Some niche providers even offer tax filing assistance for your Solo 401(k) or help with required IRS forms. Just be sure to verify any provider’s reputation and that their plan documents are IRS-compliant. The Solo 401(k) space has many players, so do your due diligence.

If your primary goal is simplicity and low cost with standard investments, a mainstream brokerage is likely best. If your goal is maximum investment flexibility or high-touch service, a specialized Solo 401(k) provider could be worth the additional cost.

Comparing Solo 401(k) Providers: Fees, Investment Options, and Features

Choosing where to open your Solo 401(k) comes down to comparing the fees, investment options, and features that different providers offer. It’s important to match the provider with your personal needs and investing style. Below is a comparison of key factors across various Solo 401(k) provider options:

Key Comparison Insights: The table above highlights that brokerage giants (Fidelity, Schwab, E*TRADE, Merrill) generally cost nothing to maintain and offer broad investment menus, but not all of them allow loans (notably, E*TRADE and Merrill do, while Fidelity and Schwab do not). Vanguard and T. Rowe Price focus on their proprietary mutual funds – excellent for low costs if those funds suffice, but restrictive if you want other securities. Specialized self-directed providers open up almost any investment possibility but charge upfront for that capability.

Turnkey providers charge more ongoing, yet simplify your life by handling plan chores and preparing you for future growth (employees).

To further illustrate how you might decide on a provider, consider these common scenarios and the best Solo 401(k) provider type for each:

Every provider has its pros and cons, which we’ll summarize next. The optimal choice depends on balancing cost vs. convenience vs. flexibility for your personal retirement strategy.

Pros and Cons of Different Solo 401(k) Provider Options

It’s useful to weigh the advantages and disadvantages of each type of Solo 401(k) provider side by side. The table below outlines the general pros and cons of using various providers (from big brokers to specialty firms) when opening a Solo 401(k):

Each option comes with trade-offs. For many solo business owners, a free brokerage Solo 401(k) is ideal for its cost-effectiveness and ample investment choices. If you have very specialized needs or low tolerance for managing the minutiae, a provider that charges a bit but handles more might be worth it.

Tax Advantages & State-Specific Nuances of Solo 401(k)s

Solo 401(k) plans offer significant tax advantages, but it’s important to understand both federal rules and any state-specific nuances that might affect you. At the federal level, you have the option to make contributions on a pre-tax (traditional) basis, on an after-tax (Roth) basis, or even both (if your provider allows Roth, you can split your contributions).

Traditional contributions reduce your current taxable income – for example, contributing $20,000 pre-tax will lower your federal adjusted gross income by that amount, saving you taxes now. Roth contributions, by contrast, do not give a tax deduction up front, but all qualified withdrawals in retirement will be tax-free.

The ability to contribute both as the “employee” (elective deferrals up to $22,500 for 2024, or $30,000 if age 50+) and as the “employer” (profit-sharing up to 25% of net self-employment earnings, for a total limit of $66,000 in 2024 or $73,500 with catch-up) allows aggressive saving with major tax benefits.

For state taxes, most states follow the federal treatment of 401(k) contributions and earnings, but there are some nuances. In virtually all states that have an income tax, traditional 401(k) contributions are also deductible from state income (because states usually start taxation from federal taxable income). This means you generally get a state tax break in the year of contribution as well.

One exception to note: a few states have quirky rules for certain retirement contributions (for example, Pennsylvania does not tax retirement plan withdrawals for those above 59½ and effectively treats contributions as after-tax in some cases, and New Jersey doesn’t allow a deduction for IRA contributions, though 401(k) deferrals via W-2 are usually pre-tax). It’s wise to confirm your own state’s treatment, but for most people, contributing pre-tax to a Solo 401(k) will lower both federal and state taxable income in the contribution year.

When it comes time to withdraw in retirement, state taxation varies. Some states—like Florida, Texas, Nevada, Washington—have no state income tax at all, so your withdrawals (whether from a traditional 401k or Roth) won’t be taxed at the state level.

Other states fully tax 401(k) withdrawals as ordinary income (e.g., California, New York), which means a traditional 401(k) gives a deferral but not an escape from state tax unless you move to a tax-free state later. A handful of states offer partial exclusions or credits for pension or retirement income (for instance, Illinois and Mississippi do not tax qualified retirement income, and Pennsylvania doesn’t tax 401k/IRA distributions after retirement age).

These nuances might influence your decision on contributing Roth vs. traditional: if you live in a high-tax state now but plan to retire in a no-tax state, the traditional 401(k) is extra attractive (you get the state tax break now and won’t pay state tax later). Conversely, if you’re in a state with no income tax now but might retire in a state that taxes income, a Roth could be beneficial to lock in tax-free treatment.

Beyond taxes, consider state-specific laws on asset protection for your Solo 401(k). Generally, 401(k) plans (even solo plans) are afforded strong protection from creditors under federal law (ERISA and bankruptcy laws).

Even though a Solo 401(k) is not subject to ERISA’s participation rules (since you have no employees besides perhaps your spouse), in bankruptcy proceedings your Solo 401(k) assets are typically protected from creditors just like a traditional employer 401k would be.

Most states also shield qualified retirement plan assets from lawsuits or judgments. This is an advantage over, say, a SEP-IRA in some jurisdictions, because IRA asset protection can be less robust in certain states or capped in bankruptcy.

So, from a legal standpoint, a Solo 401(k) is generally a safe harbor for your money, but always verify how your state treats solo-owned qualified plans outside of bankruptcy. For example, Texas and Florida have broad protection for all retirement plans, while California offers strong protection for 401(k)s but only limited, needs-based protection for IRAs.

Choosing a Solo 401(k) with any provider will give you this baseline protection; just remember, if you engage in improper transactions, that protection might be at risk (more on mistakes and legal pitfalls next).

Lastly, be aware of federal law changes that can affect Solo 401(k) features. The SECURE Act 2.0 (signed in 2022) made several enhancements that providers are adapting to: for instance, starting in 2024, high earners aged 50+ making catch-up contributions will be required to make those catch-ups as Roth contributions (meaning your plan must have a Roth option to allow catch-up for those individuals).

Most major Solo 401(k) providers are updating their plan documents to accommodate this. SECURE 2.0 also allows employer profit-sharing contributions to be designated Roth (if the plan permits, you’d pay taxes on that contribution). If these niche features interest you, check that your chosen institution’s plan can handle them – specialized providers are often quicker to implement such features than big brokers, but all plans will eventually align with federal requirements.

The Solo 401(k) is a powerful tool to reduce your taxable income and grow investments tax-deferred or tax-free, with relatively uniform treatment across the U.S. Just pay attention to how your state might tax your retirement savings now and in the future, and leverage Roth vs. traditional contributions to your advantage.

Always keep within IRS contribution limits and remember any required filings (for instance, once your Solo 401(k) account balance exceeds $250,000, you’ll need to file a short informational tax form called Form 5500-EZ each year). With the right setup, you can optimize both federal and state tax outcomes for your retirement nest egg.

Avoid These Common Solo 401(k) Mistakes

Setting up and managing a Solo 401(k) comes with responsibilities. Here are common mistakes self-employed individuals should avoid to ensure their plan remains in good standing and effective:

• Failing to Confirm Eligibility: Remember that Solo 401(k) plans are only for owner-only businesses (and spouses). Hiring full-time employees (other than your spouse) generally means you can no longer contribute to a Solo 401(k) and must transition to a regular 401(k). Don’t attempt to maintain a Solo 401(k) if your business no longer qualifies – that’s a compliance red flag.

• Not Shopping Around for the Right Provider: Don’t just open your Solo 401(k) at the first bank you think of. Compare fees and features. A common mistake is choosing a provider that doesn’t offer a feature you need (for example, selecting Vanguard and later realizing you wanted a 401(k) loan or the ability to buy non-Vanguard ETFs). It’s much easier to start with the right platform than to move the plan later, so take the time upfront to pick the best fit.

• Missing Out on Roth or After-Tax Contributions: Some solo business owners automatically go with a traditional 401(k) at their broker and never realize Roth contributions were an option. Check if your provider supports Roth contributions and utilize them if they make sense for your tax situation.

• Similarly, if you intend to do mega backdoor Roth contributions (making after-tax contributions above the normal limits and converting them), ensure you have a plan that explicitly allows this. Missing this step could mean lost opportunity for tax-free growth.

• Over-Contributing or Violating IRS Limits: The contribution limits for Solo 401(k)s can be complex, especially if you have multiple income sources. A classic error is contributing too much by not accounting for the fact that the employee deferral limit is aggregated across all plans. For example, if you max out a 401(k) at a day job ($22,500 in 2024), you cannot defer another $22,500 in your Solo 401(k) from your side business – you’re limited to $0 additional employee deferral (but you could still do employer profit-sharing from the business).

• Always calculate your maximum allowed contributions based on your self-employment earnings and what you might have contributed to other plans. If unsure, consult a tax advisor or use IRS worksheets to avoid penalties for excess contributions.

• Missing the Plan Setup Deadline: To make salary deferral contributions for a given tax year, you generally need to establish the Solo 401(k) plan by Dec 31 of that year (if you’re a sole prop or single-member LLC, effectively before year-end).

• The SECURE Act now allows new plans to be opened up until the business’s tax filing deadline (plus extensions) for employer contributions only – but you still cannot retroactively make employee deferrals if the plan wasn’t in place in the tax year. In practice, set up your plan before year-end if you want the full contribution flexibility. Procrastination can cost you the chance to defer taxes on that year’s income.

• Neglecting IRS Filings and Plan Documents: A Solo 401(k) is a real retirement plan, and once its assets grow, there are some filing duties. The most common oversight is forgetting to file Form 5500-EZ once your plan’s assets exceed $250,000 (or upon plan termination). This form is an annual information return that the IRS requires – it’s relatively simple, but if you ignore it, you could face hefty late penalties. Mark your calendar each year or choose a provider who reminds or assists with this.

• Also, if you used a prototype plan document from a provider, be aware that these documents are updated periodically (especially after major laws change). Providers will usually notify you to restate or sign updated plan documents. Don’t ignore those notices; keeping your plan document up to date is necessary for compliance.

• Engaging in Prohibited Transactions: When you control your own 401(k), it’s crucial not to misuse it. Certain transactions are forbidden by the IRS – for instance, using 401(k) funds for personal use, loaning money to yourself beyond the allowed loan rules, investing in your own operating business (outside of a formal ROBS setup), or commingling personal and 401(k) assets.

• These prohibited transactions can disqualify your plan, triggering taxes and penalties on the entire account. A cautionary example is the case of Thiessen v. Commissioner, where a couple personally guaranteed a loan taken by their Solo 401(k) to invest in a business; the Tax Court ruled this personal guarantee was a prohibited transaction, leading to the 401(k) being disqualified and taxed. Always keep your retirement plan at arm’s length from personal or unrelated business dealings. If you’re doing self-directed investments, be extra vigilant about these rules.

• Starting a “Business” Just for a 401(k) without Real Income: There’s an alluring idea out there to create a side business solely to open a Solo 401(k) and contribute large amounts. Be careful – the IRS expects your business to have legitimate earned income (net profit or W-2 salary if an S-corp) to justify contributions.

• Simply opening a business entity with no actual revenue or profit and contributing to a Solo 401(k) could be viewed as abusive. Make sure you have self-employment activity with the intent to generate profit. Even a small side gig can qualify, but it should be bona fide. Don’t risk the plan’s qualified status by bending the rules on what constitutes a business.

• Ignoring Plan Termination Procedures: If you decide to close your Solo 401(k) (say, you switch to a different plan or shut down your business), there are steps to take. Many forget to roll over the assets to an IRA or new 401(k) and file a final Form 5500-EZ indicating the plan is terminated. Leaving a plan open with a zero balance or failing to properly terminate can cause confusion or compliance issues later. When the time comes, formally terminate the plan per your document’s procedures, move the money appropriately, and notify the IRS via the final 5500-EZ.

Frequently Asked Questions (FAQs)

Q: Who is eligible to open a Solo 401(k)?
A: A self-employed individual or small business owner with no full-time employees (other than possibly a spouse) is eligible. This includes sole proprietors, single-member LLCs, partnerships, and corporation owners with only themselves (and spouse) as employees.

Q: Can I open a Solo 401(k) if I also have a full-time job with a 401(k)?
A: Yes. Having a day job with a 401(k) doesn’t prevent you from opening a Solo 401(k) for your side business. Just remember that your personal employee deferral limit is shared across all 401(k) plans.

Q: How much can I contribute to a Solo 401(k) each year?
A: In 2024, you can contribute up to $22,500 as employee deferrals ($30,000 if age 50+). Additionally, you can contribute approximately 20–25% of your business profit as an employer contribution, with a total max of $66,000 (or $73,500 with catch-up).

Q: Do Solo 401(k) contributions reduce my taxes?
A: Yes. Traditional Solo 401(k) contributions are made pre-tax, reducing your taxable income for federal (and usually state) purposes. Roth contributions won’t reduce current taxes, but qualified withdrawals in retirement will be tax-free.

Q: Are Solo 401(k) plans subject to required minimum distributions (RMDs)?
A: Generally yes, traditional Solo 401(k) funds are subject to RMDs starting at age 73 (as of recent law). Roth Solo 401(k) funds also had RMDs, but starting in 2024 Roth 401(k) accounts are no longer required to take RMDs during the original owner’s lifetime.

Q: Can my spouse participate in my Solo 401(k)?
A: If your spouse earns income from your business (and is technically an employee/partner of the business), they can also contribute to the Solo 401(k). The plan then isn’t “solo” in the sense it has two participants, but it is still a one-family business and allowed.

Q: Can I roll over other retirement accounts into a Solo 401(k)?
A: Yes, most Solo 401(k) plans accept rollovers from other eligible retirement accounts like traditional IRAs or old 401(k)s. Roth IRAs generally can’t be rolled into a 401(k). Check with your provider for their rollover process.

Q: What happens if I hire an employee after having a Solo 401(k)?
A: Once you hire non-spouse employees who become eligible for a 401(k), your Solo 401(k) can no longer continue as a solo plan. You would typically need to transition to a regular 401(k) plan covering employees or cease new contributions to the solo plan and possibly roll it over.

Q: Do I need an EIN (Employer Identification Number) to open a Solo 401(k)?
A: Often yes. Many providers require an EIN for the business or for the Solo 401(k) trust. An EIN for your business (even if you’re a sole proprietor) is easy to obtain from the IRS and is used on plan documents and any tax filings instead of your SSN.

Q: Are Solo 401(k) rules the same in every state?
A: The plan rules and contribution limits are under federal law and are the same nationwide. However, state tax treatment of contributions and withdrawals can vary (as discussed earlier), and some states have different protections or considerations for 401(k) assets.

Q: Can I take a loan from my Solo 401(k) account?
A: It depends on your plan provider and documents. Some providers (like E*TRADE, Merrill, or self-directed plans with loan provisions) allow you to take a loan of up to 50% of your account (max $50k). Others, like Vanguard or Schwab, do not permit loans in their solo plans. Always verify before opening if a loan feature is important to you.

Q: How do I actually open a Solo 401(k) once I choose a provider?
A: Opening usually involves filling out the provider’s Solo 401(k) plan application. You’ll need to provide your business details (and EIN), sign an adoption agreement for the plan, and then set up the funding account (brokerage or trust account) to hold the assets. Many brokers let you apply online. After that, you can contribute by transferring money from your business bank account (ensuring you don’t exceed limits or put in personal funds that aren’t business profit).