Can You Contribute to a 457b and Solo 401k at the Same Time?

Saving for retirement can feel complex, especially if you are eligible for multiple tax-advantaged plans. Some individuals have access to both a 457b and a Solo 401k and want to understand how to contribute to each without exceeding IRS limits. 

In 2025, the elective deferral limit for both plans is $23,500, though eligibility rules and contribution methods differ. 

This article explains how each plan works, outlines key deadlines, and provides practical examples for contributors at different career stages. You will also learn about separate deferral limits, catch-up options, and strategies for coordinating contributions. By the end, you will have a clearer picture of how to potentially maximize your retirement savings while avoiding common pitfalls.

Understanding 457b and Solo 401k Plans

Before contributing to both plans, it helps to understand how each works, who is eligible, and the basic setup requirements. Although both are tax-advantaged retirement options, they serve different types of participants and follow separate rules.

📌 Also read: Comparison of governmental 457b plans and 401k plans: Features and corrections | IRS

What Is a 457b?

A 457b plan is a tax-deferred compensation arrangement offered by certain state or local governments and qualified tax-exempt organizations under IRC Section 457b. The plan sponsor, often a government agency or a 501(c) organization, must adopt a written plan document that complies with Treasury regulations before the first deferral occurs.

Participants, which can include employees and, in some governmental plans, independent contractors, may defer a portion of their ordinary income into the plan. Contributions are made on a pre-tax basis, which reduces current taxable income, and taxes are paid when distributions occur. Distributions typically happen upon separation from service, at the participant’s normal retirement age, or in cases of specific unforeseeable emergencies.

What Is a Solo 401k?

A Solo 401k, also called a one-participant 401k, is a retirement plan designed for business owners without full-time employees, although a spouse may participate if eligible. It combines two types of contributions in a single plan:

✅ Employee deferrals: You can defer up to 100% of earned income, subject to the annual IRC Section 402(g) limit.

✅ Employer contributions: Your business may make profit-sharing contributions, generally up to 25% of compensation, following the overall annual additions limit under IRC Section 415.

How to Set Up Each Plan

Establishing a 457b

✅ Plan document: Draft or adopt a written plan that meets IRC Section 457b requirements, including any optional provisions such as catch-up elections.

✅ Election process: Decide how and when participants make deferral elections, typically before each calendar year.

✅ Payroll setup: Coordinate with a payroll provider or third-party administrator to withhold and deposit contributions into the plan’s trust or custodial account.

✅ Ongoing compliance: Keep accurate records of deferrals, monitor distribution events, and correct any operational errors following EPCRS or other applicable correction procedures.

Establishing a Solo 401k

✅ Adopt a written plan: Use an IRS pre-approved or individually drafted document that specifies eligibility, contribution formulas, and deferral elections.

✅ Obtain a plan EIN: Even if your business already has an EIN, a separate number may be required for the plan.

✅ Open a trust account: Select a custodian or trustee, such as a bank or brokerage, to hold plan assets.

✅ Implement payroll elections: Coordinate employee deferrals and employer contributions through payroll or bookkeeping systems.

✅ Filing requirements: Plans with year-end assets over $250,000 must file Form 5500-EZ; smaller plans may be exempt.

Contribution Rules & IRS Limits for Both Plans

Both 457b and Solo 401k plans allow you to save significant amounts for retirement, but each plan has its own rules. Knowing the elective-deferral limits, catch-up provisions, and deadlines helps you coordinate contributions and take full advantage of available tax benefits.

Deferral Limits Explained

In 2025, the elective-deferral limit for 457b, 401k, and 403b plans is $23,500. Each plan’s deferral bucket is separate, so you can contribute up to $23,500 to a 457b and another $23,500 to a Solo 401k without exceeding IRS limits.

Key points:

Catch-Up Contributions

Participants who are 50 or older or nearing retirement may have additional contribution options:

✅ Age 50+ catch-up

✅ Special 457b pre-retirement catch-up

✅ SECURE 2.0 super catch-up for ages 60–63

Contribution Deadlines & Tax Impacts

✅ Elective-deferral elections and payroll

✅ Solo 401k employer contributions

✅ 457b employer contributions

✏️ Hypothetical Example:

Mark, age 55, contributes $23,500 to both plans and adds $7,500 catch-up contributions for each. Coordinating payroll and employer contributions could reduce his taxable income by $61,000 in 2025.

Strategies to Maximize Retirement Savings

Coordinating contributions between a 457b and a Solo 401k can significantly increase your retirement savings. Understanding the best order to fund each plan and how catch-up contributions work helps you take full advantage of tax benefits while avoiding common mistakes.

Ordering Your Contributions

Because 457b and Solo 401k elective-deferral limits are separate, you have the opportunity to fund both plans up to their maximums. Many savers follow a sequence that takes advantage of each plan’s unique features:

Step 1: Max out the 457b first

Step 2: Fund the Solo 401k next

Step 3: Allocate additional funds to employer contributions

📝 Note: Following this sequence leverages the 457b’s penalty-free early withdrawals and the Solo 401k’s higher total contribution capacity.

Sample Contribution Scenarios

Here are 2025 examples showing total elective deferrals. These do not include employer profit-sharing contributions or special catch-ups unless noted:

Age Range	457b Deferral	Solo 401k Deferral	Total Deferral
Under 50	$23,500	$23,500	$47,000
50–59+	$23,500 + $7,500	$23,500 + $7,500	$62,000
60–63+	$23,500 + $7,500	$23,500 + $11,250	$65,750

📝  Note:

Common Pitfalls

Even with careful planning, several issues can reduce the effectiveness of dual contributions:

❌ Control-group limits

❌ Early withdrawal rules

❌ Missed deadlines

❌ Plan termination

Watch out for these common pitfalls so you can maximize the potential of both plans and better position yourself for retirement.

Wrapping It Up: How to Balance Both Plans

Using both a 457b and a Solo 401k could help you build a stronger retirement strategy by taking advantage of two separate deferral limits and flexible catch-up options. Here are the main points to keep in mind:

✅ In 2025, you may defer up to $23,500 into each plan, with additional catch-ups for age or retirement proximity.
✅ Many savers prioritize the 457b for penalty-free early withdrawals, then add Solo 401k salary deferrals, and finish with employer contributions.
✅ 457b elections must be made before payroll, while Solo 401k employer contributions are generally due by your tax-filing deadline, including extensions.

Next steps:

📌 Want to explore other advanced retirement strategies? Take a look at our guides on mega backdoor Roth IRAs, Roth 401k conversions, and IRS catch-up contribution rules.

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