How a Solo 401k Works for Self Employed Entrepreneurs

One of our top-producing agents in Utah, Sarah, recently asked, “I hear a lot of chatter about the solo 401(k) as a self-employed agent. Can I even set one up? And what kind of tax savings would that mean for me?”

That question is close to my heart because this is one of the biggest money moves I wish I had known about 15 years ago. Back then, I was focused almost entirely on GCI.

I built a large real estate business, and I could tell you where every dollar went inside the business itself. But when it came to my personal finances, they were honestly subpar.

I was making great money, but I was not clear on where it was going. I was paying for expensive CPAs and financial advisors, and the results I was getting from them were disappointing. It was not until I started seriously looking into early retirement that I took a hard look at where I was leaking money.

That is when the Solo 401(k) became one of my biggest finds. As a self-employed agent, you absolutely can set one up.

What is a Solo 401(k)? It is a retirement plan designed for self-employed individuals who do not have non-spousal employees. One of the reasons it is so powerful is that it allows for high contribution limits. It has two parts:

There is an employee contribution and an employer contribution. And as a self-employed agent, you are both.

In 2025, you can contribute up to $23,000 as an employee. On top of that, you can contribute up to 25 percent of your net self-employment income as the employer. If you are over 50, those limits can be even higher.

Sample computation: For example, Sarah is netting $150,000. The employee contribution would be $23,000 pretax. The employer contribution would be about $37,500, which is 25 percent of that net income.

That puts the total potential contribution at over $60,000 in a single year.

Now here is where people really need to follow the math.

At $150,000 in income, you are likely sitting in the 24 percent marginal federal tax bracket. If you contribute around $60,000 pretax into a Solo 401(k), you are reducing your taxable income from roughly $150,000 down to about $90,000.

That is not just a savings. That is completely avoiding that 24 percent marginal tax rate on those dollars. That can mean more than $10,000 in immediate federal tax savings in one year alone.

You keep that money, and it starts compounding for you on a tax-deferred basis. That is the power of using a pretax account like a Solo 401(k). A dollar saved is a dollar earned.

For me, this was just one piece of a bigger blueprint I had to figure out on my own after being let down by professionals I paid a lot of money to. It was alarming to realize how many high earners simply do not have the time or guidance to learn this stuff.

That is why I created my wealth-building presentation:

Wealth Building with Josh Stern: Build Wealth Like A Millionaire Agent

It covers how to pair strategies like a Solo 401(k) with triple tax-advantaged HSA savings, how rules like the rule of 72, rule of 25, and the 4 percent safe withdrawal rule actually work, and how choosing the right business structure can reduce your tax liability.

Event details

When: January 14, 2026

Time: 2:00 p.m. to 4:00 p.m.

Where: KW Utah, Midvale

Register here: Wealth Building with Josh Stern: Build Wealth Like A Millionaire Agent.

This is my most popular class to start the year, and hopefully, I’ll see you there!

For more information about our upcoming events or if you have questions about real estate, reach out to us at headcoach@kwutahcoach.com or (801) 252-5226. We’re here to help.