What defines a Solo 401(k) plan?

A Solo 401(k) plan is designed specifically for self-employed individuals or business owners with no employees other than possibly a spouse. Therefore, the focus is on the ability for the owner to contribute both as an employee and as an employer. This dual contribution benefit enhances the amount of annual contribution compared to standard individual retirement accounts.

The plan supports a business owner and a spouse working in the business, allowing the spouse to also participate and make contributions. This flexibility is one of the key distinctions of a Solo 401(k) as opposed to traditional 401(k) plans, which are structured for larger workforces.

Options that limit the scope of the Solo 401(k) plan, such as a focus on just single employees without the mention of a spouse or allowing for unlimited employee participation, do not accurately capture the essence of what a Solo 401(k) entails. The plan is inherently focused on the self-employed individual and their spouse if applicable, rather than multiple employees or unrestricted participation.