The basics of a Solo 401(k)

May 27, 2021

Question: Trevor in Deer Park: I have a side business but also work for an employer during the week. Can I save money I make with my side business in my work 401(k)?

A: You should really keep those ‘buckets’ of savings separate. And there’s actually an easy way to do this, assuming your side business is comprised of just you: Use a ‘Solo 401(k).’

A Solo 401(k) is basically just as it sounds. It’s a 401(k) plan specifically designed for self-employed folks who don’t have any employees (the IRS calls it a one-participant 401(k)). With this type of plan, you play the role of both the employer and the employee, so your contribution limits are higher than a standard 401(k): In 2021, you can contribute up to $58,000, or, if you’re age 50 or older, you can contribute up to $64,500.