GLOSSARY · INCOME & SELF-EMPLOYMENT
Solo 401(k)
A 401(k) plan for a business owner with no employees other than a spouse. The owner contributes as an employee, up to the yearly deferral limit shared with any other 401(k) they use, and as the employer, up to about 20% of net self-employment earnings for a sole proprietor, within an overall yearly limit.
Also called: one-participant 401(k), individual 401(k), self-employed 401(k)
FORMULA
Employer share (sole proprietor) ≈ 20% × (net profit − ½ self-employment tax)
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · SIDE INCOME & FREELANCING MASTERY · DEEP DIVEA Money System for Irregular IncomeCHAPTER · SIDE INCOME & FREELANCING MASTERY · DEEP DIVEScaling Beyond Your Own HoursRELATED TERMS
SOURCES
- One-participant 401(k) plans. Internal Revenue Service.
- Publication 560, Retirement Plans for Small Business. Internal Revenue Service.