Saving for retirement is hard enough when money is tight. It’s even harder when you work for a company that doesn’t offer a 401(k), or when most of your income comes from freelancing, consulting or side gigs. In those situations, many workers default to saving in an IRA — or skip saving altogether.
The problem is that IRA contribution limits are relatively low. For 2025, most workers can contribute only $7,000, or $8,000 if you’re 50 or older (1). That may not be enough to build a serious retirement fund, especially if you’re starting later or trying to catch up.
However, there’s another option many people overlook: the solo 401(k). For workers with self-employment income, it can unlock contribution limits up to $70,000 in 2025 without needing an employer-sponsored plan.
According to a Gallup poll, only about six in 10 Americans report having money invested in a retirement savings plan (2). For the millions earning income outside a traditional job, the solo 401(k) could be a powerful tool to close that gap.
A self-employed 401(k), often referred to as a solo 401(k), is a type of retirement plan designed for people who are self-employed, and works much like a corporate 401(k). It’s intended for small business owners with no full-time employees other than themselves (and, possibly, their spouses).
Millions of Americans may be eligible for this account — many without even realizing it. According to Bankrate (3), roughly one in four Americans now earn money from a side hustle. Yet many don’t treat that income as a long-term wealth-building tool. Instead, it is often spent as it comes in, missing out on tax advantages and years of compound growth.
You might qualify if you earn legitimate self-employment income through (4):
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Freelancing or consulting
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Contract or 1099 work
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A side business alongside a full-time job
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A sole proprietorship, LLC, or S-corp
What makes the solo 401(k) especially powerful is that you’re allowed to contribute as both the employee and the employer (5). For 2025, that means:
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Up to $23,500 as an employee (or $31,000 if you’re 50+)
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Additional employer contributions based on your income
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A combined maximum of $70,000 or 100% of eligible compensation, whichever is lower (or more for older savers under special catch-up rules)
There are potential tax breaks, as well. Depending on your business structure, you may be able to deduct contributions from your taxable income. Even better, workers who already max out a workplace 401(k) may still be able to use a solo 401(k) for employer-only contributions tied to their side income.
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Opening a solo 401(k) isn’t as complicated as it sounds, especially compared to setting up other retirement vehicles from scratch. Most major brokerages, including Fidelity and Charles Schwab, offer solo 401(k) plans and handle the required paperwork.
The basic steps typically include:
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Confirm you have qualifying self-employment income
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Choose a provider and open the plan
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Establish the plan before contributing
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Set up contributions — ideally on an automated schedule
One important nuance: a solo 401(k) can sometimes be established after year-end and still allow certain prior-year contributions, depending on the type of contribution and IRS deadlines. This can be helpful for freelancers who don’t know their final income until tax season (7).
Side-gig income often feels temporary or “extra,” making it easy to overlook when planning for retirement. But the long-term impact can be significant. Consider this: If a freelancer earns $20,000 a year on the side and saves none of it, they miss the chance to shelter that income from taxes and grow it over decades. Contributing even a portion, say $5,000 annually, into a tax-advantaged account could translate into hundreds of thousands of dollars by retirement, depending on market performance.
Solo 401(k)s can involve more rules and paperwork than IRAs. Contribution limits, filing requirements, and tax treatment can get complex, especially as balances grow. But, for freelancers and side hustlers willing to treat that income as future money, not just spending money, a solo 401(k) can be a game-changing retirement tool hiding in plain sight.
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IRS (1); Gallup (2); Bankrate (3); Guideline (4); Fidelity (5); Lord Abbett (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
