The Solo 401(k) - Retirement Planning for the Self-Employed

Running a consultancy, LLC, or S-Corp in the Pacific Northwest and getting close to retirement? This episode of The Perfect Retirement Plan? is built for you. Phillip Smith, Financial Planner with Tidepool Wealth Strategies, shows late-career small business owners how a Solo 401(k) can cut today’s taxes, accelerate savings in your final 5–7 working years, and stay flexible when income is lumpy. 

We cover 2025 Solo 401(k) contribution limits, stacking employee deferrals with employer profit sharing, age-50 catch-ups and the enhanced 60–63 super catch-up, plus pretax vs Roth vs after-tax dollars (including when a “mega backdoor Roth” makes sense). You’ll also hear Solo 401(k) vs SEP IRA vs SIMPLE IRA trade-offs for Oregon/Washington owners, S-Corp wage considerations, key setup and funding deadlines, plan loans, rollovers, and practical SECURE 2.0 updates. If you’re searching “Solo 401k for consultants,” “SEP vs Solo 401k,” or “late-career retirement planning for business owners,” start here. 

 Chapters
 00:00 Intro and why this matters when you're nearing retirement
 00:29 Solo 401(k) overview for sole proprietors
 01:13 Roadmap for the episode
 02:07 Solo 401(k) basics and eligibility
 02:39 2025 contribution limits, catch-ups, deadlines
 04:19 Pretax vs Roth vs after-tax, mega backdoor Roth
 06:28 Solo 401(k) vs SEP IRA vs SIMPLE IRA
 11:42 Loans and rollover considerations
 12:26 SECURE 2.0 updates to note
 14:18 Action steps for this quarter
 15:08 Closing and disclosure 

Subscribe for more on retirement income, tax efficiency, and investment strategy. Explore additional content on our YouTube channel @TidepoolWealth and visit TidepoolWealth.com. 

Thanks for tuning in to this episode of The Perfect Retirement Plan, and remember: it's not about having the smartest financial advisor, the most money saved, or the highest probability of retirement success. The perfect retirement plan, for you – is the one you act on.

Phillip Smith, CRPC AIF |  Financial Planner
Tidepool Wealth Strategies
450 Country Club Road, Suite 350 | Eugene, OR | 97401

____________________________________________________________________________________________
Additional Disclosures: 
The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Wealth Services, LLC cannot guarantee or represent that it is accurate or complete.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. 

Transcript

Episode: The Solo 401(k) – Retirement Planning Tool for the Self-Employed

Outline

• Introduction and Emotional Hook
• Roadmap of Today’s Episode
• Solo 401(k) Basics for Sole Proprietors Nearing Retirement
• Topic 1 – Super‑Sizing Contributions Chronologically (Employee, Employer, Catch‑Up, Super Catch‑Up)
• Topic 2 – Dialing the Tax Dial: Pre‑Tax vs. Roth vs. After‑Tax
• Topic 3 – Solo 401(k) vs. SEP‑IRA and SIMPLE‑IRA: A Detailed Pros and Cons Showdown
• Topic 4 – Smart Loan and Rollover Uses (and When to Avoid Them)
• Topic 5 – SECURE 2.0 Tweaks and Hidden Opportunities (Roth Catch‑Ups, Emergency Withdrawals, QBI Coordination)
• Closing & Disclosure
• Sources (if any listed) 

[Introduction]

Hi, I’m Phillip Smith, financial planner with Tidepool Wealth Strategies, guiding late‑career professionals toward retirement with clarity, confidence, tax‑smart income, and purpose. Welcome to The Perfect Retirement Plan?

[Main Content]

You just paid the last tuition invoice, the mortgage is almost gone, and your consulting income finally cracked six figures. Yet every extra dollar is still piling up in your business account, a growing target that the IRS would love to pounce on next April. 

They say money talks, but when the IRS gets involved, you usually just see it waving goodbye.

Today we’ll talk about turning that target into a Solo 401(k) strategy that has the potential to shelters taxes, accelerate growth, and maintain flexibility in case life throws a curveball. And don’t worry - I’ll keep the dad jokes to a minimum… if we’re lucky.

Stay tuned until the end, because I’ll reveal a brand‑new SECURE 2.0 quirk that offers the potential to put an extra five‑figure boost in your retirement balance if you act before next tax season.

Here’s the roadmap for today:

Be sure to listen all the way through, because each of these five moves builds on the next.

First, let’s we’ll hit those Solo 401(k) fundamentals for proprietors close to retirement.

Then, we’ll do chronological walkthrough of contributions: employee, employer, catch‑ups, and super catch‑ups.

 Third, we’ll look at dialing your mix of pre‑tax, Roth, and after‑tax dollars.

After that, a detailed pros and cons showdown - Solo 401(k) versus SEP and SIMPLE.
 We’ll follow with plan loans, rollovers, and SECURE 2.0 opportunities you can use this year.

 And finally, actionable steps you can tackle this quarter.

Grab your notebook, and stay with me to catch every tip. Let’s wade in.

Let’s begin with some Solo 401(k) Basics for Sole Proprietors Nearing Retirement

A Solo 401(k) is available to solo business owners with zero full‑time employees other than a spouse. You wear two hats-employee and employer-letting you stack far more cash than a SEP or traditional IRA while keeping costs low. Two hats, one head, double the contribution capacity-try fitting that into a dad‑hat collection.

Topic 1 – Super‑Sizing Contributions Chronologically

First, as the employee, defer up to $23,500 for 2025. Since you’re 50 or older, tack on the $7,500 catch‑up for $31,000 total. Choose pre‑tax, Roth, or a blend.

Second, as the employer, your business may contribute up to 25 percent of net self‑employment income-about 20 percent after the SE‑tax adjustment-until the combined cap hits $69,000 for 2025.

Third, if you’re 60, 61, 62, or 63, SECURE 2.0 unlocks a super catch‑up. That’s the greater of $10,000 or 150 percent of the standard catch‑up. With 2025 numbers, that’s an extra $11,250, pushing your potential Solo K contribution near $80,250.

Next, fund these layers in order: employee deferral and catch-up contributions by April 15, as your cash flow allows, and employer profit‑sharing by your tax‑extension deadline – as late as October 15 of 2026 for a 2025 contribution.

Topic 2 – Dialing the Tax Dial: Pre‑Tax vs. Roth vs. After‑Tax

If you’re just joining us, stick around, because in our next segment I’ll compare these Solo K tax buckets to other small‑biz plans so you can pick the perfect fit.: Pre‑Tax vs. Roth vs. After‑Tax

Late‑career proprietors often straddle a high bracket now and a lower one later.

• Pre‑tax deferrals slash this year’s Schedule C   income and SE tax.

• Roth deferrals skip the deduction today but grow tax‑free for life-great if future conversions would nudge you into higher brackets. I mention the tax brackets because converting from pre-tax money, like a traditional IRA to a Roth IRA is a taxable event.

 • After‑tax contributions, if your provider allows, can be rolled to a Roth IRA when you close the business, creating a “mega” Roth opportunity.

Start by pitching in enough pre‑tax dollars to land in your target bracket-often 22% for married filers-then funnel the rest into Roth. Add after‑tax only if cash flow is stellar and your plan permits in‑plan Roth transfers. Adjust the faucet-too much cold water (pre‑tax) and future taxes scald; too much hot (Roth) and you lose relief today. Aim for lukewarm, Goldilocks‑approved water.

Topic 3 - Solo 401(k) vs. SEP‑IRA and SIMPLE‑IRA: A Detailed Pros and Cons Showdown
Time for a quick 3-way comparison. Solo K versus the SEP versus the SIMPLE-let’s see who walks away with the belt.

On Contribution muscle
the Solo 401(k): Combines employee deferral plus employer profit‑sharing. A 55‑year‑old netting $200k could stash $71k total. Add super catch‑ups at 60‑63 and you’re flirting with $80k.

Meanwhile, with the SEP‑IRA, it’s an Employer-only contribution at a max of 25 percent of earned income. Depending on income – and how you’ve structured the business for tax purposes and therefore whether someone pays themselves a salary - an owner could be severely constrained by their own W-2 wages. 

In a SIMPLE‑IRA, it’s cleaner: Deferral of $16,500 plus $3,500 catch‑up and a mandatory 3 percent match. Tops out near $27k. That’s like showing up to a buffet with a lunchbox.

Roth and after‑tax options
Solo K allows Roth salary deferrals and, and with the right plan design, you might have access to after‑tax contributions plus in‑plan Roth rollovers. SEP and SIMPLE only recently began to allow for Roth contributions, but that new money source makes those plans a little less “simple” to manage. And there is no way to do above and beyond after-tax contributions.

On Catch‑ups
Solo K offers the $7,500 standard catch‑up and that shiny new $11,250 enhanced catch‑up. SEP has none. SIMPLE dishes out a skimpy $3,500.

Regarding Flexibility and loans
Solo K: Borrow up to $50k or 50 percent of the balance; employer share is discretionary.
SEP and SIMPLE: No loans. SIMPLE also forces a match even in lean years.

And then considering Administration and cost
Solo K: One Form 5500‑EZ after assets exceed $250k and around $500-$800 in annual fees

 SEP/SIMPLE: Zero filings, near‑zero cost for administration.

And important consideration is how Future staffing can impact the plan
Solo K can convert to a traditional 401(k) without retroactive funding when you hire. SEP must fund the same percentage for new staff, which could put a in the ability to max contributions. SIMPLE plans structured with the matching contribution require matches for all eligible employees.

So here’s a quick recap: The Solo 401(k) wields the biggest shovel and a greater number of tax pools to play in. SEP and SIMPLE are cheaper to set up but smaller and less adaptable when you need last‑minute contributions.

Topic 4 – Smart Loan and Rollover Uses

Keep listening, because right after this we’ll unpack the latest SECURE 2.0 tweaks that most sole proprietors still haven’t heard about.

Solo K loans let you borrow up to $50,000 or half the balance. Use sparingly-bridge a short property flip or emergency cash flow, sure. Funding a vacation? That’s a no from me, dawg. Repay within five years on schedule or the loan turns into a taxable distribution with penalties.

If you snag a W‑2 job later, roll your Solo K into the new employer plan or IRAs. Pay off any loan first; Uncle Sam doesn’t accept IOUs.

Topic 5 – SECURE 2.0 Tweaks and Hidden Opportunities

Mandatory Roth catch‑ups in the 401(k) and 403(b) plan arrive in 2026 for anyone earning more than $145k on their W-2.     

Emergency withdrawals allow a $1,000 penalty‑free pull each year-handy for flat tires, not Hawaiian getaways.

The 20 percent QBI deduction can vanish if you lower business income too far with pre‑tax contributions. Sometimes shifting part of the employer deposit to Roth keeps the deduction alive.

SECURE 2.0 changes roll out like Oregon road repair-slow and full of orange cones. Know which lanes are open so your tax savings don’t hit a pothole.

Lots to consider, and the right fit often depends on your specific situation...okay, let’s take some action on this

You made it to the action phase - well done! Here’s how to put today’s ideas to work:

First, open or review your Solo 401(k) documents and note contribution deadlines.
 Next, set your employee deferral percentage in payroll software to max out by year‑end.
 
 

Then, meet with your CPA to estimate employer profit‑sharing before December 31 and reserve cash for the deposit.
 
 

After that, map your pre‑tax versus Roth mix to keep taxable income in your chosen bracket.

 Finally, if you’ll be 60‑63 in 2025, confirm your provider will enable the super catch‑up and update your budget.

Closing

Remember, it isn’t about having the smartest advisor, the most money saved, or the highest probability of retirement success. The perfect retirement plan for you is the one you act on – preferably before the next IRS due date.

Oh, I gotta squeeze this in regarding the Roth IRA to ensure I’m keeping compliant disclosures top of mind: A Roth IRA  does offer tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, what we call qualified distributions, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase, which has a $10,000 lifetime maximum. Depending on state law, nonqualified Roth IRA distributions may be subject to state taxes. Qualified distributions are 100% tax free.

Disclosure

It’s disclosure time! This podcast is intended for educational purposes only and should not be used for any other purpose. The views depicted in this material should not be considered specific advice or recommendations for any individual, are not intended to be financial, tax, or legal advice and are not representative of Tidepool Wealth Strategies or Cetera Wealth Services LLC. The opinions contained in this material are those of Phillip Smith, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Wealth Services, LLC cannot guarantee or represent that it is accurate or complete.  For a comprehensive review of your personal situation, always consult with a financial, tax or legal advisor. Neither Cetera nor any of its representatives may give legal or tax advice. 

Our office address is 450 Country Club Road Suite 350 Eugene Oregon 97401. Securities offered through Cetera Wealth Services, LLC, member FINRA/S I P C. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.