Individual(k): A Retirement Plan Built for Self-employed Business Owners

Individual(k) defined: Discover how this retirement plan designed specifically for self-employed owners and their spouses works, including eligibility requirements.

Maximize your savings: Because you’re essentially both the employer and the employee, you can contribute more than you would with an IRA.

Tax advantages: Gain tax benefits for both the business and the individual, including pre-tax or Roth options on contributions.

Being self‑employed gives you flexibility and control—but on the flip side, it also means you’re responsible for building your own retirement benefits. If you run an owner‑only business or work for yourself with no employees (other than a spouse), an Individual(k) plan is designed specifically for your situation, offering higher contribution limits and greater flexibility than traditional IRAs.

What is an Individual(k) plan?

An Individual(k) plan, also known as an owner‑only or Solo 401(k), is often the most flexible and highest‑contribution retirement option available to self‑employed individuals and owner‑only businesses. You can contribute to the plan as both the employer and the employee—a key reason Individual(k) plans allow higher total contributions than SEP or SIMPLE IRAs. This helps you maximize retirement savings as well as deductions for the business.

Who qualifies for an Individual(k) plan?

Owner-only businesses whose only employees are the owner or the owner and spouse
Partnerships whose only employees are partners or partners and spouses
C and S corporations where the corporation has only one shareholder and the only employees are the shareholder or shareholder and spouse

Eligibility requirements for an Individual 401(k) plan

To be eligible to start an Individual(k) for your business, you must be a self-employed business owner with no employees—although the Internal Revenue Service (IRS) does allow one exception to this rule for your spouse if they also earn income from the business.

There are no age restrictions for starting an Individual(k) plan; the only income requirement is that you have enough earned income or W-2 wages to support a 401(k) contribution. You will also need to have an Employer Identification Number, and you’ll want to have an idea of the plan design and plan features you’d like to take advantage of, as many retirement plan providers will have more than one Individual(k) option available.

Advantages of an Individual(k) for self--employed owners

An Individual(k) offers big benefits for small business owners. First and foremost, it’s a way to save for retirement that offers contribution limits much higher than those of an IRA. Plus, since you qualify as both employer and employee, contributions can be made in both capacities—allowing you to save more.

In addition, if you’re age 50 or older, you can also take advantage of catch-up contributions. If your spouse also earns income from the business, they may be eligible to participate in the plan as well.

Unlike traditional employer-sponsored 401(k) plans, Individual(k)s generally don’t require annual non-discrimination testing since there are no rank-and-file employees—reducing administrative complexity compared to traditional employer 401(k) plans.

Comparing Individual(k) to SEP and SIMPLE IRAs

While SEP and SIMPLE IRAs are popular retirement options for self‑employed individuals, an Individual(k) often offers greater flexibility and higher overall contribution potential—especially for owners looking to maximize savings.

Because Individual(k) plans allow both employee deferrals and employer contributions, many self‑employed owners can contribute more each year than they could with IRA‑based plans.

Contribution limits by plan type

Compare annual contribution limits for the various plan types:

Type of Retirement Plan
	401(k) Plan	Individual(k) Plan	SIMPLE IRA	SEP IRA
Employee contribution limits	Up to $24,500	Up to $24,500	Up to $17,000	Not allowed
Employer contribution	Flexible, up to 25% of compensation¹	Flexible, up to 25% of compensation¹	Mandatory contribution: generally, a 100% match on deferrals up to 3% of compensation OR a 2% contribution to all eligible employees²	Flexible, up to 25% of compensation¹
Catch-up contributions (in addition to maximum employer + employee limits)	Up to $8,000 for those aged 50+ OR an increased catch-up of $11,250 for those aged 60-63	Up to $8,000 for those aged 50+ OR an increased catch-up of $11,250 for those aged 60-63	Up to $4,000³ for those aged 50+ OR an increased catch-up of $5,250 for those aged 60-63	Not allowed

Note: Employee contributions are not allowed in profit sharing plans and SEP IRAs.

¹25% of compensation for employer tax deduction.

²Employer match may be reduced to as low as 1% for any two out of five-year period.

³Potential higher catch-up limits for participants in plans maintained by specified small employers.

Want a deeper comparison? Explore how Individual(k), SEP IRA, and SIMPLE IRA plans stack up for different business types.

How Individual(k) plans support tax-efficient saving

There are also a variety of tax advantages that are associated with Individual(k) plans—both for the business and the individual. Depending on your business structure, you can fund profit sharing contributions to the plan up until the business tax-filing deadline, which is a huge benefit for those who find themselves needing last-minute tax breaks at year end.

Additionally, profit-sharing contributions are tax deductible as the employer. Contributions also grow tax-free while in the account and with the power of compounding interest, can grow significantly over the course of a career.

Funding options for Individual(k) plans

Another major advantage of Individual(k) plans is funding flexibility. Depending on your business structure, employer contributions and employee contributions (in certain situations) can often be funded as a one-time lump sum deposit.

This timing flexibility can be especially helpful for year‑end tax planning. Many business owners work with their CPA or financial advisor to assess annual tax liability before deciding how much to contribute. Keep in mind that any employee deferral contributions generally need to be elected by the end of the plan year.

Some providers also offer an automatic funding option for Individual(k) plans, which deposits your employee contributions to the plan automatically on a weekly, bi-weekly, semi-monthly, or monthly basis (based on your payroll schedule), so you don’t have to manage contributions manually.

Roth and pre-tax contribution options

Choosing between pre‑tax and Roth contributions allows self‑employed owners to align retirement savings with both current tax strategy and long‑term income planning.

Individual(k) plans support multiple tax treatment options:

Pre-tax: Traditionally, contributions are deducted from your gross income, which means you get a tax break now and pay taxes on this money when you withdraw it in retirement
Roth: Contributions to your retirement savings are made with after-tax dollars, which means you don’t get a tax break now, but you’ll be able to withdraw that money tax-free in retirement
Split: You also have the flexibility to split contributions between both pre-tax and Roth, as long as you don’t exceed the annual limit

Ready to get started?

We have retirement plans for businesses of all sizes, so even if you’re self-employed with no employees, we can still help you get on the path to retirement readiness.

Contact our team at 833-893-3233 to learn more about Individual(k)s and other options.