What is an Individual 401(k)?
An Individual 401(k)—also known as a solo 401(k)—is a retirement plan that can maximize your savings if you're self-employed or if you're a partner in a business whose only employees are the partners and their spouses.
Who can participate
Self-employed individuals and business owners with no common-law employees and their spouses who are employed by the business. The business owner can contribute both as an employer and employee. Also C corporations, S corporations, and limited liability companies (LLCs).
Employer contribution limits
- Up to 25% of compensation* not to exceed $57,000 for the 2020 tax year and $58,000 for the 2021 tax year.
- Contributions are generally deductible as a business expense and aren't required every year. When contributions are made, however, all participants must receive the same percentage.
Employee contribution limits
- Employees may defer 100% of their compensation up to $19,500 for the 2020 tax year ($26,000 for employees age 50 or older) and $19,500 for the 2021 tax year ($26,000 for employees age 50 or older).
- Employee contributions can be either pre-tax or after tax (Roth).
As a business owner, you can contribute both as an employer and employee. The combined amount of employer plus employee contributions can't exceed $57,000 for the 2020 tax year ($63,500 if age 50 or older) and $58,000 for the 2021 tax year ($64,500 if age 50 or older).
No age, income, or other restrictions.
Vanguard plan features
Roth (after-tax) contributions are allowed.
Account service fees
We charge $20 a year for each Vanguard fund held in a Vanguard Individual 401(k) account. We'll waive the fee for all participants in the plan if at least one participant has at least $50,000 in qualifying Vanguard assets.
Account setup & maintenance
- There's no fee to establish an account.
- An Employer Identification Number (EIN) is required to establish the plan. You cannot use your Social Security Number. If you don't have an EIN, apply for one online at IRS.gov.
- For one-participant plans, annual filing of Form 5500 is required once the plan's assets reach $250,000 at the end of your plan year or you terminate your plan. We'll provide you with information each year to help you complete the form.
- Plan administration may require occasional duties, such as periodically updating or restating the plan.
Withdrawals & loans
- You can't take withdrawals until a specified event, such as reaching age 59½, termination of the plan, separation from service, or other event as identified in the plan.
- You may be allowed to take a hardship withdrawal, which may be subject to a 10% penalty if you're under age 59½.
- You may not take a loan from your Vanguard Individual 401(k).
- You'll pay ordinary income tax on any taxable distributions.
- Roth distributions are tax- and penalty-free if taken after age 59½ and you've had the Roth Individual 401(k) for more than 5 years.
- For existing clients, click here to start your digital experience.
- For new clients, call us at 800-992-7188. A specialist will be able to assist you with your retirement plan needs.
An employee other than an owner, a business partner, or a shareholder of a corporation and their respective spouses. (Independent contractors are not employees.)
A type of investment that pools shareholder money and invests it in a variety of securities. Each investor owns shares of the fund and can buy or sell these shares at any time. Mutual funds are typically more diversified, low-cost, and convenient than investing in individual securities, and they're professionally managed.
A fund that buys all (or a representative sample) of the securities in a specific index, such as the S&P 500 Index.
Eligibility is first calculated using qualifying assets for an individual client. We then combine the qualifying assets of clients sharing a residential address to determine final eligibility*.
Assets that qualify
- Any assets under management of Vanguard Personal Advisor Services.
- Vanguard mutual funds and Vanguard ETFs held by a client in certain personal accounts qualify. Personal account types include: individual non-retirement, education savings accounts, IRAs, Joint, Trust, Custodian, Guardian, UTMA, UGMA, Estate, Sole Proprietorship, and Single-Participant SEP IRA plans.
Note: Vanguard assets in a Vanguard 529 Plan, Vanguard Variable Annuity, Multi-participant SEP IRA plans, SIMPLE, i401k, 403(b), family partnership, family corporation, or employer-sponsored retirement plans for which Vanguard provides recordkeeping services may be included in determining eligibility if you also have a personal account holding Vanguard mutual funds or Vanguard ETFs. Assets held in other account types are not eligible to be included in service eligibility determination.
We review qualifications periodically
The qualification criteria (for example, asset levels) are reviewed periodically and could change at any time. Vanguard reserves the right to discontinue enrollment in any of these services or reassign any investor, without prior notification, to the appropriate service level if the investor fails to continue to meet the applicable qualification criteria. Vanguard reserves the right to amend or cancel selected features and benefits at any time without prior notification.
In addition, ongoing access by any particular investor to individual services, discounts, and exemptions is subject to periodic review and may be restricted based upon criteria established solely by Vanguard. While these services are complimentary, some underlying services may charge fees and expenses. Vanguard does not guarantee any level of service.
*Business addresses and other non-residential addresses are not eligible to be aggregated for purposes of determining services.