Solo 401k FAQ | Self directed 401 k for small business

What is a Solo 401(k) plan?

What is a Solo 401(k) plan?

A Solo 401k plan, otherwise known as a “one-participant retirement plan,” is designed specifically for self-employed and small business owners with no full-time employees (IRS considers workers who are employed over 1,000 hours per year to be full-time). The one-participant retirement plan is a cost-effective way for the self-employed to accelerate their retirement savings.

Solo 401k FAQ: Eligibility

Who is qualified to set up a Solo 401k plan?
What types of businesses can sponsor a Solo 401k?
Can I hire a part-time employee?
What happens when I hire a full-time employee?

Solo 401k FAQ: Plan Setup

What is the deadline for establishing a Solo 401(k)?

The plan must be established by December 31st of the current year. Depending on the business type, contributions to the plan can be made after year-end.

SECURE Act: The deadline to open a Solo 401k plan was extended under the act until tax filing day plus filed extension.
What types of accounts can be rolled over to a Solo 401k plan?
Where are my funds kept?

Solo 401k FAQ: Contributions

What is the contribution limit for a Solo 401k?

The Solo 401k allows two types of contributions: salary deferrals and profit sharing contributions. The salary deferral is limited to $23,500 in 2025. The profit sharing contribution is limited to 20 to 25% of the business profit. The total contribution limit, including profit sharing, is limited to $70,000 a year as of 2025.

For those who are over 50 years old, a $7,500 catch-up contribution is allowed, bringing the maximum contribution to $77,500.
How much can my spouse contribute to the Solo 401k plan?
When is the contribution deadline?

For a corporation’s employee, salary-deferral contributions must be funded throughout the year. Typically, if the corporation uses a payroll service, the employee elective deferral is deducted from the employee’s paycheck.

For sole-proprietors, both employee and profit-sharing contributions can be made up to the tax filing deadline.
Is there a minimum contribution required?

No, you are not required to make contributions to the Solo 401k every year. You can contribute as little as you want or even suspend contributions during difficult years. However, in order to keep the plan in compliance, substantial contributions are required from time to time.

Solo 401k FAQ: Roth Solo 401k

What is a Roth contribution?

Roth contributions are made after-tax. Instead of making deferred tax payments until the time of withdrawal, you will pay taxes up front for your Roth contribution. However, there will be no tax at the time of withdrawal, even on the earnings you make from investing the original amount.
How much can I contribute to my Roth Solo 401k?
What are the benefits of a Roth Solo 401k?

Solo 401k FAQ: Investments

What can I invest my Solo 401k plan in?

The Solo 401k plan can hold almost any legally available investment with the exception of insurance and collectibles. You can choose to invest your Solo 401k funds in stocks, bonds, mutual funds, real estate, precious metals, private lending, tax liens, trust deeds, and more.
Who will direct my investments?
What does checkbook control mean?

It means that, as the trustee of your Solo 401k, you can make investments simply by writing a check or completing a wire transfer. This saves you time and money by not having to go through a custodian. With checkbook control, you can also set up the bank account for your Solo 401k and have direct access to it. You will be the only one who transfers the money in and out of the account.
What are the rules that I need to know when investing my Solo 401k plan?

You need to remember that you are acting on behalf of the plan. Make sure that all investment assets are titled under the name of the plan, and keep them separate from your business and personal investments.
You also need to avoid engaging in prohibited transactions. For more information, please read this page.

Solo 401k FAQ: Loan Options

Can I borrow from a Solo 401k, and how much can I borrow?

You can borrow up to $50,000 or 50% of the total account value from your Solo 401k plan, whichever is less. The loan has to be paid back on at least a quarterly basis and is due in full after 5 years. The interest rate is prime rate plus 1% and is paid back into your account.
What happens if I cannot pay back the loan before the due date?
Can I use the loan to buy a house/ pay my tuition, etc.?

The Solo 401k Offered by Sense Financial

What are the services that you provide?

Sense Financial provides Solo 401k establishment services, which includes preparing plan documents and obtaining an Employer Identification Number (EIN) for your Solo 401k. We also provide unlimited client support and continuing compliance services for your Solo 401k plan, which includes assistance with filling tax forms when required, maintenance of the plan documents, assistance with transfers and rollovers, and more. Please see this page for more details.
How do I get started?

What our Clients are Saying:

In my opinion, anyone that owns their own business should have a Solo 401K, and I would highly recommend Sense Financial – you will not be disappointed!

Ben D. – Spokane, WA

Sense Financial made the entire process extremely easy and they have been very responsive. I’ve recommended them to many people already.

Michael L. – Humble, TX

Dmitriy and his staff were consummate professionals. I rolled my Solo 401 (k) into a Self Directed Solo 401 (k). Dmitriy handled it smoothly and confidently…

Mindy Jensen – Longmont, CO
BiggerPockets Community Manager

Alternate investment options with your self-directed account:

Real Estate

Precious Metals

Private Business

Stocks & Bonds

Private Lending

Cryptocurrency

Investments That Make Sense!

It’s Your Money. It’s Your Future. Invest Your Way.

Schedule Consultation Now

Our expert team is always ready to answer you! You can email us at contact@sensefinancial.com

Solo 401k FAQ: Answers to Common Solo 401k Questions