How to Open a 401k Without An Employer

Not every job comes with a retirement plan. In fact, many small businesses and startups skip offering a 401k due to the administrative costs and ongoing responsibilities. 

If your employer does not offer one (or if you work for yourself), you might be wondering how to build your retirement savings in a tax-efficient way. The good news is that you may not need a traditional employer-sponsored 401k to access powerful retirement tools.

There are options designed specifically for individuals without access to a workplace plan. Some of these alternatives could even offer higher contribution limits, more control over investments, and the same tax advantages as a regular 401k.

This guide explains how to open a 401k plan without an employer, what your options are, and how to choose the right one based on your income and self-employment status.

You Can Open a Solo 401k Without an Employer

The Solo 401k is a retirement plan designed for individuals who work for themselves and do not have full-time employees. You do not need an outside employer to open this plan. Instead, you are both the employer and the employee, which is what makes the Solo 401k possible. That dual role gives you the ability to contribute on both sides, potentially allowing for higher contributions than many other retirement plans.

To open a Solo 401k, you must meet just two eligibility requirements:

✅ You must earn self-employed income.

This could come from freelancing, consulting, owning a small business, or even part-time side gigs.

✅ You must not have any full-time employees.

The rule applies to anyone who is:

📝 Note: Your spouse is excluded from this rule. If your spouse earns income from the business, they can also participate in the Solo 401k, potentially doubling your household contributions.

You can open a Solo 401k under any business structure, including:

There are no income minimums or maximums to qualify. Whether you earn $200,000 from consulting or $800 from weekend photography, the Solo 401k is still available to you as long as you meet the two criteria above.

Why a Solo 401k Is Better Than an Employer-Sponsored 401k

A Solo 401k can offer more control, higher contribution potential, and tax flexibility that many employer-sponsored plans do not provide. The advantages below highlight why this plan is worth considering if you qualify.

Higher Contribution Limits

A Solo 401k follows the same IRS contribution ceiling as a standard 401k. The difference is that you contribute as both the employee and the employer. This gives you the ability to put away more each year when compared with most workplace plans.

Employee contributions for 2025:

✅ You may contribute up to 100% of your compensation
✅ Up to a limit of $23,500
✅ If you are age 50 or older, the limit increases to $31,000

Employer contributions depend on business structure:

📝 Note: Net adjusted income for unincorporated businesses accounts for the self-employment tax deduction. This means the contribution base is lower than gross earnings.

The combined contribution limit for 2025 is:

This structure is what makes a Solo 401k powerful. You may contribute far more than you could through most employer plans, especially if your self-employed income is strong.

More Investment Options

Workplace 401k plans commonly limit investments to a small list of mutual funds. A Solo 401k generally gives you access to a wider range of asset types. This can include individual stocks, certain types of real estate, and private funds. IRS rules still apply, and prohibited transactions can lead to penalties.

📝 Note: Collectibles are not permitted in qualified plans. Real estate is allowed, but only when the investment avoids self-dealing and any personal use. S corporation stock is generally limited to ESOP structures and is not typical inside a Solo 401k. Life insurance in qualified plans follows strict “incidental benefit” limits rather than a full ban.

The broader menu offers more flexibility, but investors must follow IRS rules carefully.

Roth Option

Many employers do not include a Roth 401k in their plan. A Solo 401k usually offers both a traditional and Roth option when your provider’s plan document supports it.

The difference between the two is based on when taxes apply:

Employee and employer contributions may both be directed into the pre-tax Solo 401k. This could give you a large potential deduction if you choose pre-tax contributions for the full amount. Some plans may also allow employer contributions to be designated as Roth if the contributions are fully vested and the plan permits this treatment.

Loan option

With a Solo 401k, you’re allowed to take a loan from your own account, depending on your provider. Not every plan includes it, so you must check the plan documents before relying on the feature.

If your plan allows loans:

Taking a loan avoids the 10% early withdrawal penalty that applies before age 59½. It also avoids current income taxes on the borrowed amount. However, removing funds from your account reduces the amount invested for retirement, so most experts view loans as a last resort.

📝 Note: A loan feature is only available if the plan provider includes it in the plan design.

How to Open a Solo 401k Without an Employer

If you run a business with no employees, you can open a Solo 401k on your own. All you need is a business with self-employed income and an Employer Identification Number (EIN). From there, you choose a provider and complete a few required steps to get started.

Steps to Open a Solo 401k

✅ 1. Choose a Solo 401k plan provider.

Each provider offers a different plan setup, investment options, fees, and features. Some plans are self-directed, while others include integrated investment platforms and Roth options. Look for a provider that aligns with your goals and preferred level of account control.

✅ 2. Get an EIN for your business (if you don’t already have one).

You need an EIN to establish the Solo 401k in the name of your business. This can be obtained for free through the IRS website.

✅ 3. Complete the plan documents.

This includes an application, a plan adoption agreement, and a basic plan document. These materials establish the legal structure of your Solo 401k.

✅ 4. Obtain an EIN for your Solo 401k trust.

The Solo 401k plan must operate under a separate trust. You will need a second EIN for this trust to open plan bank or brokerage accounts.

✅ 5. Open a bank or brokerage account in the name of the Solo 401k trust.

This account will receive contributions and hold investments. You must keep Solo 401k assets separate from personal or business accounts.

✅ 6. Fund the Solo 401k.

Once your accounts are open, you can begin making employee and employer contributions based on your self-employed income and the applicable IRS limits.

✅ 7. Begin investing.

You can invest according to the rules of your chosen plan. Make sure your investments comply with IRS restrictions, especially around prohibited transactions and asset types.

📝 Note: Not all Solo 401k providers offer the same features. If you want access to a Roth account, loan provisions, or direct account control over investment decisions, you will need to confirm these features are included.

📌 Learn more about the Carry Solo 401k if you want a fully managed Solo 401k plan with a Roth account and an integrated investment platform.

You May Still Qualify Even With a Job

Even if you already participate in a 401k through your employer, you could still open a Solo 401k if you have a side business with self-employed income and no employees.

However, your employee contribution limit applies across all plans combined. For 2025, that limit is:

This limit includes all elective deferrals made across both your workplace 401k and your Solo 401k. Employer contributions do not count toward the employee limit, so you may still make separate employer contributions through your side business.

📌 Also read: How to Set Up A Solo 401k Plan

Other Retirement Account Options You Can Open Without an Employer

The Solo 401k is the only 401k plan available without an outside employer. But it is not your only retirement savings option. Individual retirement accounts (IRAs) and the SEP IRA are both widely used alternatives, each with its own features, tax rules, and eligibility limits.

Overview: Solo 401k vs IRAs

Account Type	Requires Self-Employment?	Employee Contributions?	2025 Limit	Roth Option?
Solo 401k	✅ Yes	✅ Yes	$70,000 / $77,500 (age 50+)	✅ If plan allows
Traditional IRA	❌ No	✅ Yes	$7,000 / $8,000 (age 50+)	❌ No
Roth IRA	❌ No	✅ Yes	$7,000 / $8,000 (age 50+)	✅ Yes
SEP IRA	✅ Yes (with employees)	❌ Employer only	$70,000	✅ If provider offers

Traditional IRA and Roth IRA

Both of these accounts are designed for individuals and do not require a business or employer.

✅ Traditional IRA

✅ Roth IRA

To open either account, you must have earned income (such as wages or self-employment income). Roth IRA contributions are subject to income limits, and deductibility of traditional IRA contributions may be limited if you or your spouse are covered by a workplace plan. The specific income thresholds can change each year, so it’s important to confirm the current limits before contributing.

For 2025, the combined contribution limit for traditional and Roth IRAs is:

📝 Note: These limits are significantly lower than those for 401k plans. However, IRAs are still a helpful supplement to employer plans or Solo 401ks, especially when you are early in your career or earning a lower income.

SEP IRA (Simplified Employee Pension)

A SEP IRA is often used by business owners who are not eligible for a Solo 401k due to having employees. If you have W-2 workers who meet the eligibility criteria (age 21, at least 500 hours of service per year for 2 consecutive years), the Solo 401k is no longer an option. A SEP IRA may be the next best alternative.

Benefits  of a SEP IRA:

✅ Employer-only contributions—no employee deferrals
✅ No income limits to participate
✅ Easier to administer than a full 401k plan
✅ Contribution limit for 2025 is $70,000

❌ Disadvantage of a SEP IRA: No catch-up contributions for age 50+ participants.

Contributions to a SEP IRA are based on 25% of compensation, up to the annual IRS limits. For unincorporated businesses, the calculation uses adjusted net earnings, and reaching the maximum contribution often requires higher income compared to a Solo 401k.

Equal Percentage Rule for Employees

One important requirement: if you contribute to your own SEP IRA, you must contribute the same percentage of compensation for every eligible employee.

✏️ Hypothetical Example: 

If you contribute 10% of your own income to your SEP IRA, you must also contribute 10% of each eligible employee’s income to their accounts.

📝 Note: This rule can make the SEP IRA costly if you have multiple employees. For sole proprietors or small business owners with just one or two workers, it might still be manageable.

Final Thoughts

You do not need a traditional employer to start saving for retirement. If you have self-employment income and no employees, a Solo 401k could be a flexible option with higher contribution limits and more control over how you invest.

If a Solo 401k does not fit your situation, accounts like a traditional IRA, Roth IRA, or SEP IRA may be worth exploring. Each has its own rules and benefits, so the best choice depends on how you earn income and whether you run a business.

As a next step, take a closer look at your income sources and goals. Then, compare plan providers to see which account types and features are available to you. A little planning now can make a meaningful difference later.

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Disclaimer:

The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.

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