What is a Solo(k) and who qualifies?

A Solo(k) is a retirement plan designed for self-employed business owners without employees other than themselves and, in some cases, a spouse. It's a powerful retirement savings vehicle because your client can contribute as both the employee and the employer, and make contributions on a pre-tax or Roth (after-tax) basis.

To qualify, your client's business may not have non-spouse W-2 employees.

My client has a W-2 job and also does some work on the side. Can they set up a Solo(k) for that income?

In many cases, yes. The Solo(k) would cover your client's self-employment income only. Keep in mind that the elective deferral limit ($24,500 for 2026) is a combined limit across all of their 401(k) plans, so any deferrals to an employer's plan count against it. However, unrelated employer-side contributions to the Solo(k) are separate and can significantly increase their total retirement savings. Your client should talk to their tax advisor about their specific situation.

My client's spouse helps in the business. Can they be included in the plan?

Yes, if the spouse is paid by the business and meets the plan's eligibility requirements (minimum age 21 and one year of service under Aboon's standard document), they can participate. For a new plan, this requirement is waived at the start. This may effectively double the household's contribution capacity.

My client has 1099 contractors who help them. Does that disqualify them?

No. Independent contractors (1099 workers) are not employees for retirement plan purposes. Only W-2 employees would disqualify your client from a Solo(k). Your client should contact their tax advisor for questions about independent contractor status and requirements.

How much can my client contribute?

For 2026, the limits are:

Elective deferrals (pre-tax or Roth): up to $24,500
Catch-up contributions (age 50+): additional $8,000
Enhanced catch-up (age 60-63): additional $11,250 instead of $8,000
Employer contributions: up to 25% of W-2 compensation (for S-corps/C-corps) or ~20% of net self-employment income (for sole proprietors/partnerships)
Total annual additions limit: $72,000 (not counting catch-up)

The advantage of the Solo(k) is combining employee deferrals with employer contributions. Depending on income and age, your client could contribute significantly more than with a SEP IRA. Your client should talk to their tax advisor about the exact amounts for their situation.

Can my client make Roth contributions?

Yes. All Aboon Solo(k) plans include a Roth elective deferral option. Your client can choose to make their 401(k) deferrals as pre-tax, Roth, or a combination of both. Roth contributions are made with after-tax dollars but grow and can be withdrawn tax-free in retirement when conditions are met. Your client should talk to their tax advisor about their specific situation.

What about after-tax contributions or mega backdoor Roth?

Aboon's Solo(k) plan does not currently support voluntary after-tax contributions or Roth conversions.

What's the deadline to set up a plan for this tax year?

It depends on your client's business type and the type of contribution:

S-corporations and corporations: if your client wants to make employee deferral contributions, the plan must be established by December 31 of the year. Employer contributions can be made up to the business tax filing deadline, including extensions.
Sole proprietors: the plan can be established up to the extended tax filing deadline. Note: the employee deferral contribution must be deposited by April 15; the extended due date applies to the employer contribution only. For example, a sole proprietor on extension could establish and fund a plan as late as October 15, 2027 for the 2026 tax year.

Your client should talk to their tax advisor about their specific situation.

How long does it take to set up a new plan?

The Aboon plan document process takes 15-20 minutes. Separately, your client will need to complete the account setup process with you to open the investment account and fund the plan.

My client currently has a SEP IRA. Should they switch to a Solo(k)?

A Solo(k) often allows higher total contributions than a SEP IRA because it includes both employee deferrals and employer contributions. For example, a 52-year-old S-corp owner with $100,000 in W-2 income could contribute $25,000 to a SEP (25% of compensation) but up to $57,500 to a Solo(k) ($24,500 deferral + $8,000 catch-up + $25,000 employer contribution). A Solo(k) also offers Roth deferrals, which SEPs don't.

The tradeoff: a Solo(k) has more administrative requirements (plan document, potential Form 5500-EZ filing with the IRS). Clients should work with their tax advisor to determine which option makes more sense for their situation.