Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
One-Person 401(k) Plan
Self-Employed Persons
If you're self-employed and have no employees, except for your spouse, you can set up a "solo" 401(k) plan.
A one-participant 401(k) plan is sometimes called:
- Solo 401(k)
- Solo-k
- Uni-k
- One-participant k
Keep in mind, the one-participant 401(k) plan is not a new type of 401(k) plan. It's simply a traditional 401(k) plan covering a business owner with no employees, or the business owner and his or her spouse. Solo 401(k) plans have the same rules and requirements as any other 401(k) plan.
Self-Employed Person Treated as Employer and Employee
For income tax purposes, a self-employed person, such as a sole proprietor or partner in a general partnership, is not treated as an employee of his own business. However, for retirement plan purposes a self-employed person wears two hats, one as "employee" and another as "employer". This means a self-employed person may make two separate plan contributions to his/her own 401(k) plan under the plan's contribution rules that apply to an employee and another contribution under the plan's rules that apply to the employer. This "double-contribution rule allows a substantially greater contribution amount. (Note that this "double-contribution" rule for self-employed persons also applies to SIMPLE plans, but not to SEP plans.)
2023 Solo 401(k) Contribution Limits
Since a self-employed person may make two separate contributions on his/her own behalf as both employee and employer, the following contribution limits apply:
- 2023 Contribution Limits to Solo 401(k) Plan:
- As employee, the maximum contribution is 22,500.
- As employer, an additional contribution of 25% of earned income.
- If aged 50 and older, an additional $7,500 as an employee may be contributed.
- The combined employee and employer contributions cannot exceed $66,000, or $73,500 for those who are age 50 or older.
Compensation Limits
The IRS limits the amount of compensation that determines retirement contributions. For 2023, the compensation limit is $330,000. For example, a self-employed person under 50 with earned income of $100,000 can contribute $22,500 as an employee and up to $25,000 (25% of $100,000) as an employer, for a total of $47,500.
Changes for 2024
401(k), 403(b), most 457 Plans and the Federal Government's Thrift Savings Plan:
The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan is increased to $23,000 (up from $22,500).
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, participants in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,500, starting in 2024.
The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.
IRA Contributions:
The 2024 limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over remains $1,000 for 2024.
Solo Roth 401(k) Contribution Limits
A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.
- You cannot deduct contributions to a Roth IRA.
- If you satisfy the requirements, qualified distributions are tax-free.
- You can make contributions to your Roth IRA after you reach age 70 ½.
- You can leave amounts in your Roth IRA as long as you live.
- The account or annuity must be designated as a Roth IRA when it is set up.
- If your solo 401(k) plan allows Roth contributions, the Roth solo 401(k) contribution limit is the same as the pre-tax contribution limit.
- Contributions and earnings in a Roth 401 (k) can be withdrawn without paying taxes and penalties if you are at least 59½ and had your account for at least five years.
- Withdrawals can be made without penalty if you become disabled or by a beneficiary after your death. Rollovers allow you to avoid taxes on Roth 401 (k) earnings.