Planning for retirement can be more complex when you’re self-employed. If you’re a real estate agent earning self-employment income, you might wonder if you have the same options as employees at bigger firms. 

The good news? A Solo 401k may offer a potential way to build retirement savings while also managing taxes.

This article explains who qualifies, how the plan works, and why it might be worth considering for your real estate business.

The Solo 401k Handbook

Everything you need to know about the most powerful retirement plan for business owners and the self-employed.

Table of contents

Can Real Estate Agents Open a Solo 401k?

Yes, many self-employed real estate agents qualify for a Solo 401k. However, there are a few important rules to know.

A Solo 401k (sometimes called a one-participant 401k) is designed for individuals who operate their own business with no full-time employees. This makes it a good fit for real estate agents who work as sole proprietors, independent contractors, or through an LLC or S corporation.

Solo 401k Requirements for Real Estate Agents

To be eligible, you must meet these key criteria:

✅ Self-Employment Income: You’ll need to earn self-employed income, like commissions or fees from selling properties.

✅ No Full-Time Employees: Except for your spouse, you can’t employ anyone who works 1,000 or more hours per year.

✅ Eligible Business Types: Sole proprietorships, partnerships, LLCs, and corporations can all qualify.

📝 Note: Hiring a full-time employee (other than a spouse) means the plan would need to cover them too, and it could bring additional compliance requirements under IRS rules.

📌 Also Read: Important Forms for Solo 401k Owners

Benefits of a Solo 401k for Real Estate Agents

A Solo 401k can be a flexible and advantageous retirement plan for self-employed real estate professionals. Here are what make it worth considering:

1. Higher Contribution Limits

Solo 401k plans typically allow higher contributions than other retirement options for self-employed individuals. This is particularly helpful in high-income years for real estate agents, offering the opportunity to set aside meaningful dollars for retirement.

2. Tax Advantages (Traditional vs. Roth)

A Solo 401k gives you the option to make traditional or Roth contributions:

✅ Traditional Solo 401k: Your contributions are made before taxes, which may lower your taxable income today. You’ll pay ordinary income taxes when you withdraw the money in retirement.

✅ Roth Solo 401k: Your contributions are made after taxes, but qualified withdrawals in retirement could be tax-free.

Choosing between the two depends on whether you expect your tax rate to be higher or lower in retirement. It’s generally a good idea to talk with a tax professional to see which one might better fit your situation.

3. Investment Flexibility

Solo 401k plans typically offer a wide range of investment options. You could invest in stocks, bonds, mutual funds, and even real estate, though certain rules apply if you’re buying property within your plan. 

📝 Note: The IRS prohibits some investments, like collectibles or personal-use property, so it’s important to stay compliant to avoid penalties.

Solo 401k Contribution Limits (2025)

Knowing how much you could contribute to a Solo 401k is important for building your retirement savings. The IRS updates these limits each year, and here’s what you need to know for 2025:

✅ Employee Contributions

  • You may contribute up to $23,500 as an employee contribution.
  • If you’re age 50 or older, you may add an extra $7,500 in catch-up contributions, raising your total employee contribution to $31,000.

✅ Employer Contributions

  • On top of what you contribute as an employee, you may also contribute as your own employer.
  • Employer contributions may be up to 25 percent of your compensation (based on net earnings if you’re a sole proprietor, or W-2 wages if you’re an S Corp owner).

✅ Total Combined Limit

  • The total combined contribution (employee + employer) is capped at $70,000 for 2025.
  • If you’re age 50 or older, your combined limit may be as high as $77,500 thanks to the catch-up contribution.

📝 Note: Reaching these limits depends on your income. For example, your net earnings after deducting half your self-employment tax will affect how much you’re eligible to contribute. The IRS offers detailed guidance for calculating this depending on whether you’re a sole proprietor, S Corp, or other business type.

📌 Also Read: What Are The Different Types Of Business Entities?

Is a Solo 401k Worth It for Real Estate Agents?

A Solo 401k may be worth considering if you’re a self-employed real estate agent looking to save for retirement. It could allow you to contribute more than other plans, while offering tax benefits and investment flexibility. But it also comes with eligibility rules and compliance tasks to manage.

✅ Possible advantages:

  • Higher contribution limits
  • Investment flexibility
  • Option to include a spouse in the plan

❗ Things to consider:

  • Annual IRS filings once plan assets exceed $250,000
  • Not available if you hire full-time employees
  • Ongoing compliance requirements, such as plan documentation and reporting

Your business structure, income level, and long-term goals will all play a role in determining if a Solo 401k is the right fit. It’s generally recommended to consult a tax or financial professional to help determine if this plan aligns with your needs.

📌 Want to learn how to open a Solo 401k? Check out: How to Open a 401k Without An Employer

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