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How do Solo 401(k) contributions work — the employee plus employer math?

A Solo 401(k) lets you wear two hats: employee and employer. As the employee you can defer up to $23,500 in 2025 ($31,000 if you're 50+ with the $7,500 catch-up). As the employer you can add a profit-sharing contribution of up to 25% of your compensation. The combined total can't exceed $70,000 in 2025 ($77,500 with the catch-up). For a sole proprietor, the employer percentage is calculated on net self-employment income after the self-employment-tax deduction, which works out to roughly 20% of net profit. So a solo earning $100,000 net might defer $23,500 as employee plus about $18,500 as employer. The big advantage over a SEP-IRA is that the employee deferral lets you save a lot more at moderate income levels. Map your numbers in wealthserene.com/tools/retirement-planner.

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Educational disclaimer. Everything on WealthSerene.com is educational and is not investment advice. Projections and calculations are illustrative; actual results depend on market conditions, your situation and factors outside this tool’s scope. For a decision specific to your situation, consult a qualified financial professional. View full disclosures