Workers making money from side gigs may be missing out on a powerful savings tool. What to know about the solo 401(k)

Saving for status is hard capable erstwhile wealth is tight. It’s adjacent harder erstwhile you enactment for a institution that doesn’t connection a 401(k), oregon erstwhile astir of your income comes from freelancing, consulting oregon broadside gigs. In those situations, galore workers default to redeeming successful an IRA — oregon skip redeeming altogether.

The occupation is that IRA publication limits are comparatively low. For 2025, astir workers tin lend lone $7,000, oregon $8,000 if you’re 50 oregon older (1). That whitethorn not beryllium capable to physique a superior status fund, particularly if you’re starting aboriginal oregon trying to drawback up.

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However, there’s different enactment galore radical overlook: the solo 401(k). For workers with self-employment income, it tin unlock publication limits up to $70,000 successful 2025 without needing an employer-sponsored plan.

According to a Gallup poll, lone astir six successful 10 Americans study having wealth invested successful a status savings program (2). For the millions earning income extracurricular a accepted job, the solo 401(k) could beryllium a almighty instrumentality to adjacent that gap.

A self-employed 401(k), often referred to arsenic a solo 401(k), is simply a benignant of status program designed for radical who are self-employed, and works overmuch similar a firm 401(k). It’s intended for tiny concern owners with nary full-time employees different than themselves (and, possibly, their spouses).

Millions of Americans whitethorn beryllium eligible for this relationship — galore without adjacent realizing it. According to Bankrate (3), astir 1 successful 4 Americans present gain wealth from a broadside hustle. Yet galore don’t dainty that income arsenic a semipermanent wealth-building tool. Instead, it is often spent arsenic it comes in, missing retired connected taxation advantages and years of compound growth.

You mightiness suffice if you gain morganatic self-employment income done (4):

• Freelancing oregon consulting

• Contract oregon 1099 work

• A broadside concern alongside a full-time job

• A sole proprietorship, LLC, oregon S-corp

What makes the solo 401(k) particularly almighty is that you’re allowed to lend arsenic some the worker and the leader (5). For 2025, that means:

• Up to $23,500 arsenic an worker (or $31,000 if you’re 50+)

• Additional leader contributions based connected your income

• A combined maximum of $70,000 oregon 100% of eligible compensation, whichever is little (or much for older savers nether peculiar catch-up rules)