What is a Solo 401(k) and how does it work for self-employed individuals?

A Solo 401(k), also called a one-participant 401(k), is an employer-sponsored retirement plan for a self-employed business owner with no eligible common-law employees other than a spouse. The owner may contribute in both employee and employer capacities, subject to annual contribution and compensation limits.

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

A self-employed individual or owner-only business may establish a Solo 401(k) when the business has no common-law employees who meet the plan's eligibility requirements, other than the owner's spouse. Eligibility depends on the business structure, earned compensation, employee status, and terms of the plan document.

What are the Solo 401(k) contribution limits for 2026?

For 2026, an owner may make employee elective deferrals of up to $24,500, subject to compensation and the combined individual deferral limit across applicable plans. Total employee and employer contributions are generally limited to the lesser of 100% of eligible compensation or $72,000, excluding catch-up contributions. Participants age 50 or older may contribute an additional $8,000, for a potential total of $80,000. Eligible participants ages 60 through 63 may use the higher $11,250 catch-up contribution instead, for a potential total of $83,250. Special contribution calculations apply to self-employed individuals.

Can I make both pre-tax and Roth contributions to a Solo 401(k)?

Yes, when permitted by the plan document. Employee elective deferrals may be made as traditional pre-tax contributions, designated Roth after-tax contributions, or a combination of both. The combined contributions remain subject to the same annual employee elective-deferral limit.

Can I take a loan from my Solo 401(k)?

A Solo 401(k) may permit participant loans when loan provisions are included in the plan document. The maximum loan is generally the lesser of 50% of the participant's vested account balance or $50,000. Loan repayment and other requirements must be followed to prevent the outstanding amount from being treated as a taxable distribution.

How do I set up a Solo 401(k) for my business?

To establish a Solo 401(k), the business adopts a written plan document, selects a trustee or plan provider, opens the plan account, and completes the required employer and participant documentation. IRA Club SBS onboarding specialists can assist with plan design, account setup, contribution options, and administrative requirements.

What are the tax benefits of a Solo 401(k) for self-employed individuals?

Traditional employee elective deferrals are generally made on a pre-tax basis, while eligible employer contributions may generally be deductible subject to applicable limits. Designated Roth contributions are made after tax, and qualified Roth distributions may be received tax-free when the applicable requirements are satisfied.

Can I roll over other retirement accounts into a Solo 401(k)?

A Solo 401(k) may accept eligible rollover distributions when the plan document permits them. Eligible sources may include pre-tax assets from a Traditional IRA, SEP IRA, former employer 401(k), 403(b), governmental 457(b), or another qualified retirement plan. Roth IRA assets cannot be rolled into a Solo 401(k). Designated Roth assets from another employer plan may be accepted into the plan's designated Roth account when permitted.

What happens if I hire employees after opening a Solo 401(k)?

If the business hires common-law employees who satisfy the plan's eligibility requirements, those employees generally must be included in the plan. The plan will no longer operate solely as a one-participant plan and may become subject to nondiscrimination testing, participant notices, reporting, and other standard 401(k) requirements unless an applicable exemption or safe harbor applies.

What is a SEP IRA and how does it work for small businesses?

A Simplified Employee Pension, or SEP IRA, is an employer-funded retirement arrangement for self-employed individuals and businesses. Employers make discretionary contributions to SEP-IRAs established for eligible employees, including eligible business owners. Contributions are immediately vested, and the employer may generally decide each year whether to contribute.

Who is eligible to set up a SEP IRA?

A business of any size may establish a SEP IRA, including a sole proprietorship, partnership, limited liability company, S corporation, or C corporation. SEP IRAs are commonly used by self-employed individuals and businesses with few employees, but they are not limited to owner-only businesses.

What are the SEP IRA contribution limits for 2026?

For 2026, employer contributions for an eligible employee are limited to the lesser of 25% of eligible compensation or $72,000. Special calculations apply when determining the allowable contribution for a self-employed business owner.

Are SEP IRA contributions tax-deductible for small business owners?

Employer SEP IRA contributions are generally deductible as a business expense, subject to applicable deduction limits and tax rules. Investment earnings generally grow tax-deferred until they are distributed from the account.

Can employees contribute to their own SEP IRA accounts?

Employees cannot make salary-deferral or catch-up contributions under a standard SEP plan because SEP contributions are funded by the employer. However, an employee may be able to make a regular annual Traditional IRA contribution to the same SEP-IRA when permitted by the financial institution, subject to the normal IRA contribution rules.

What are the main benefits of a SEP IRA for small businesses?

SEP IRAs offer relatively high contribution limits, flexible annual employer funding, immediate vesting, straightforward setup, and generally lower administrative requirements than many qualified retirement plans. Employers normally do not file an annual Form 5500 for a SEP plan.

How are SEP IRA contributions allocated among employees?

Under a standard SEP arrangement, an employer generally contributes the same percentage of eligible compensation for every eligible participant, including the business owner. Contributions must follow the allocation formula in the SEP plan document and applicable compensation limits.

What investment options are available in a SEP IRA?

IRA Club SBS supports traditional investment options and integration with iFlip for AI-powered investing. Permitted alternative investments may include real estate, private equity, precious metals, cryptocurrency, tax liens, and private loans. IRA Club SBS does not provide investment or structuring advice, make investment recommendations, or perform due diligence for account holders.

When is the deadline to set up and fund a SEP IRA for the previous tax year?

A SEP plan may generally be established for a tax year as late as the due date of the business's federal income tax return, including extensions. Employer contributions intended to be deducted for that year generally must also be made by the applicable tax-return due date, including extensions.

What are the withdrawal rules and penalties for SEP IRAs?

SEP IRA withdrawals are generally taxable as income. A distribution taken before age 59½ may also be subject to a 10% additional tax unless an exception applies. SEP IRA owners generally must begin required minimum distributions after reaching the applicable RMD age, which is currently age 73.

What is a Safe Harbor 401(k) and how does it work?

A Safe Harbor 401(k) is an employer-sponsored retirement plan that uses required employer contributions and other safe-harbor provisions. When the applicable requirements are satisfied, the plan is generally exempt from the annual ADP and ACP nondiscrimination tests that apply to traditional 401(k) plans.

What are the employer contribution requirements for a Safe Harbor 401(k)?

A traditional Safe Harbor 401(k) generally uses either a nonelective contribution of at least 3% of compensation for eligible employees or a qualifying matching formula. A common basic match is 100% of the first 3% an employee defers plus 50% of the next 2%. Other qualifying enhanced matching or automatic-enrollment safe-harbor formulas may also be available.

What are the 2026 Safe Harbor 401(k) contribution limits?

For 2026, employees may make combined traditional and designated Roth 401(k) elective deferrals of up to $24,500. If the plan permits catch-up contributions, participants age 50 or older may contribute an additional $8,000. Eligible participants ages 60 through 63 may use the higher $11,250 catch-up contribution instead. The combined employee and employer contribution limit is generally the lesser of 100% of compensation or $72,000, excluding eligible catch-up contributions.

How does a Safe Harbor 401(k) benefit small business owners?

A Safe Harbor 401(k) can reduce the risk of ADP and ACP testing failures, provide more predictable employer contribution requirements, and make it easier for owners and highly compensated employees to contribute without corrective refunds caused by those tests. It can also help businesses offer a competitive employee retirement benefit.

How is a Safe Harbor 401(k) different from a traditional 401(k)?

A traditional 401(k) may be subject to annual ADP and ACP nondiscrimination testing. A Safe Harbor 401(k) uses required employer contributions and satisfies additional safe-harbor rules so that it can generally avoid those tests. Traditional safe-harbor contributions are generally fully vested when made, while certain QACA safe-harbor contributions may use up to a two-year vesting schedule.

When is the deadline to start a Safe Harbor 401(k) plan for 2026?

For certain new calendar-year plans using a matching safe-harbor design, October 1, 2026 is generally the practical latest effective date because the first safe-harbor plan year must usually operate for at least three months. Different deadlines and amendment rules apply to nonelective safe-harbor designs, existing plans, QACA arrangements, and other circumstances, so employers should confirm the applicable deadline with their plan administrator.

Can I offer a Safe Harbor 401(k) with automatic enrollment or Roth options?

Yes. A Safe Harbor 401(k) may include automatic enrollment, and a qualified automatic contribution arrangement, or QACA, is a specific safe-harbor design with automatic enrollment requirements. The plan may also permit both traditional pre-tax and designated Roth 401(k) employee contributions when those options are included in the plan document.

How do AI-powered and alternative investments integrate with a Safe Harbor 401(k)?

IRA Club SBS describes integration with iFlip for AI-powered investing and may support permitted alternative investment arrangements depending on the plan's design and investment platform. Available investments are subject to the plan document, applicable fiduciary requirements, and participant eligibility. IRA Club SBS does not provide investment or structuring advice.

What are the compliance advantages of Safe Harbor 401(k) plans?

When all safe-harbor requirements are satisfied, the plan is generally exempt from annual ADP and ACP nondiscrimination testing. A Safe Harbor 401(k) is not automatically exempt from every compliance requirement. A top-heavy exemption may apply when the plan consists solely of qualifying safe-harbor contributions and meets the applicable conditions.

How much does it cost to set up and maintain a Safe Harbor 401(k)?

IRA Club SBS lists its customized Safe Harbor 401(k) service as starting at $2,950 annually, plus an active participation fee. Final pricing may depend on the plan design, number of participants, administration requirements, payroll integration, and selected services.

What is a Traditional or Roth 401(k) plan and how does it work?

A 401(k) is an employer-sponsored retirement plan that allows eligible employees to save through payroll deductions. Traditional 401(k) contributions are generally made before federal income tax, while designated Roth 401(k) contributions are made after tax. A plan may offer one or both contribution options.

How can a Traditional or Roth 401(k) help my small business and employees?

A 401(k) can help a business attract and retain employees, provide higher contribution limits than individual IRAs, and give employees a structured way to save for retirement. Employer contributions may also be deductible, subject to applicable tax rules and plan limits.

What are the annual contribution limits for a Traditional or Roth 401(k)?

For 2026, employees may make combined Traditional and designated Roth 401(k) elective deferrals of up to $24,500. If permitted by the plan, participants age 50 or older may contribute an additional $8,000. Eligible participants ages 60 through 63 may use the higher $11,250 catch-up contribution instead. Combined employee and employer contributions are generally limited to the lesser of 100% of compensation or $72,000, excluding eligible catch-up contributions.

Who is eligible to participate in a Traditional or Roth 401(k) plan?

Eligibility is defined in the plan document and must comply with federal participation rules. A plan may offer immediate eligibility or generally require employees to reach age 21 and complete up to one year of service before making elective deferrals. Additional rules may apply to eligible long-term part-time employees.

What are the tax benefits of a Traditional or Roth 401(k)?

Traditional 401(k) elective deferrals generally reduce current federal taxable income, and earnings grow tax-deferred until distributed. Designated Roth 401(k) contributions are made after tax, and qualified distributions of contributions and earnings may be received tax-free when applicable requirements are satisfied.

Can my business match employee contributions?

Yes. A business may make matching contributions based on employee elective deferrals or use another employer contribution formula allowed by the plan. Employer contributions may generally be deductible, subject to applicable limits, and may follow a vesting schedule unless the plan requires immediate vesting.

What happens if an employee withdraws funds early?

A taxable 401(k) distribution received before age 59½ may be subject to ordinary income tax and an additional 10% tax unless a specific exception applies. A hardship distribution may permit access to plan funds, but hardship status alone does not automatically exempt the distribution from the additional 10% tax.

What are required minimum distributions for Traditional and Roth 401(k) accounts?

Traditional 401(k) accounts are generally subject to required minimum distributions beginning at the applicable RMD age, which may be age 73 or 75 depending on the participant's date of birth. Some participants in a current employer's plan may delay RMDs until retirement if the plan permits and they are not 5% owners. Designated Roth 401(k) accounts are not subject to lifetime RMDs for the original owner.

How do I get started with a Traditional or Roth 401(k) for my business?

Schedule a consultation with IRA Club SBS to discuss workforce size, eligibility, contribution options, employer matching, investment arrangements, payroll integration, compliance requirements, and the plan structure that may be appropriate for the business.

What is a payroll deduction IRA, and how does it work?

A payroll deduction IRA allows employees to contribute automatically to an individual Traditional or Roth IRA through after-tax paycheck deductions. The employee opens the IRA, authorizes a deduction amount, and the employer forwards the authorized contribution to the employee's IRA each pay period.

SIMPLE IRA Plans for Small Businesses

Help your small business team save more for retirement with higher contribution limits and employer matching. Our SIMPLE IRA combines easy setup with smart AI-powered investing, making small business retirement planning simpler.

Why a SIMPLE IRA at IRA Club SBS?

Lead Your Team Forward with Protected AI Investing

Empower your employees with access to an AI-powered investing platform built to protect and grow wealth, at a cost that’s up to 6x lower than the industry standard.

		Wealth Manager	Robo Advisor	Online Broker
Investments managed with AI	✓	✓
Can choose market index strategy	✓			✓
Low minimum investment ($500)	✓			✓
Ability to pay 0% in fees	✓
Built with protection in mind	✓	✓
Intuitive online experience	✓	✓	✓	✓
Choose individual stocks or ETFs	✓	✓	✓	✓

Invest in Alternative Assets with a SIMPLE IRA

Diversify your portfolio with alternative assets like real estate, private placements, and more, investing in what you know and understand to build a strategy aligned with your expertise and goals.

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Our payroll integration helps you connect your SIMPLE IRA
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What is a SIMPLE IRA and how does it work for small businesses?

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement plan designed for businesses with 100 or fewer employees. Both employers and employees can contribute, with employers required to make either matching or non-elective contributions. The plan is cost-effective and helps employees save for retirement with tax advantages.

Who is eligible to participate in a SIMPLE IRA plan?

Businesses with 100 or fewer employees who earned at least $5,000 in any two previous years are eligible to set up a SIMPLE IRA. Employees who meet the $5,000 earnings threshold can participate.

What are the contribution limits for SIMPLE IRAs in 2026?

For 2026:

Standard Employee elective deferral limit: $17,000
Plans with 25 or fewer employees: $18,100
Catch-up contribution (age 50 – 59; 64+): $4,000
“Super” Catch-up (age 60 – 63): $5,250

Employers must either match employee contributions up to 3% of compensation or make a 2% non-elective contribution for each eligible employee.

How does employer matching work in a SIMPLE IRA?

Employers can choose to match employee contributions dollar-for-dollar up to 3% of each employee’s salary or contribute 2% of each eligible employee’s salary regardless of whether the employee contributes.

What are the main benefits of a SIMPLE IRA for small business owners?

SIMPLE IRAs are easy and inexpensive to set up, require no annual IRS filing on the employer’s part, provide tax-deductible employer contributions, and help attract and retain employees with a valuable retirement benefit.

How do employees make contributions to a SIMPLE IRA?

Employees elect to have a portion of their salary automatically deducted and contributed to their SIMPLE IRA on a pre-tax basis, reducing their taxable income for the year.

What investment options are available in a SIMPLE IRA?

At IRA Club SBS, our systems integrate with iFlip, a protected AI-powered investing platform that adapts to today’s unpredictable markets, letting you and your team invest confidently without timing the market or paying high advisor fees.

Additionally, alternative investments such as real estate, private equity, precious metals, cryptocurrencies, tax liens, and private loans are permitted. IRA Club SBS is not licensed to provide investment or structuring advice or make recommendations; employees must find their own alternative investments and conduct their own due diligence. See “alternative investing” for details.

Are SIMPLE IRA contributions tax-deductible?

Employee contributions are made pre-tax, reducing taxable income. Employer contributions are also tax-deductible as a business expense.

What are the rules for withdrawing money from a SIMPLE IRA?

Withdrawals before age 59½ are subject to income tax and a 10% penalty. If withdrawn within the first two years of participation, the penalty increases to 25%.

How do I set up a SIMPLE IRA plan for my small business?

You can establish a SIMPLE IRA by completing IRS Form 5304-SIMPLE or 5305-SIMPLE. The process is straightforward, with minimal paperwork and no annual IRS filing requirement for the employer. Contact our onboarding specialist at IRA Club SBS here.

Does a SIMPLE IRA satisfy a state retirement mandate?

A SIMPLE IRA may satisfy a state retirement mandate when the applicable state program recognizes an employer-sponsored retirement plan as an alternative. State rules determine whether your plan qualifies and what exemption steps apply. Our [Illinois Secure Choice] and [Colorado SecureSavings] guides explain the requirements for those programs.

What does it cost a small business to offer a SIMPLE IRA?

IRA Club SBS uses flat-fee pricing rather than charging a percentage of your plan’s assets. The fee includes plan setup support, payroll integration, and ongoing administrative support. Eligible employers may also qualify for federal startup tax credits. The SIMPLE IRA pricing page lists current fees and included services.

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