You already take full advantage of your employer’s retirement plan, whether that’s a 401(k) or 403(b). But as a high earner looking to save diligently for retirement, it doesn’t take long to reach the annual contribution limit. In 2026, for example, pre-tax contributions are capped at $24,500, which means you may be fully funded well before the year is over. [1]
For many high earners, especially those with additional income streams, the bigger challenge is finding ways to continue saving beyond these limits in a tax-efficient way.
At the same time, it’s becoming increasingly more common for full-time employees to earn income outside their primary job. If you offer freelancing or consulting services, or maybe you’re turning your favorite hobby into an income source, you may need an LLC. This is especially true for 1099 contractors who earn meaningful self-employment income alongside a W-2 job. Not only can an LLC provide critical legal protections for business owners, but it also allows sole proprietors and their spouses to access additional retirement savings opportunities—as long as certain conditions are met.
One of the most compelling benefits is the ability to make post-tax contributions and convert them to Roth within a properly structured Solo 401(k), potentially creating a powerful source of tax-free retirement income.
Here’s why it may be worth establishing a separate retirement account, called a Solo 401(k), under your LLC.
What Is a Solo 401(k)?
A Solo 401(k) is a retirement plan, similar to a traditional 401(k), that’s designed specifically for self-employed individuals or business owners with no full-time employees (other than a spouse). This includes business owners and 1099 contractors who earn self-employment income, even if they also participate in an employer-sponsored retirement plan through a W-2 job. To be eligible to open and contribute to a Solo 401(k) under your LLC, you must earn income.
A Solo 401(k) can be an especially advantageous offering for solopreneurs since it enables you to contribute as both the employee and the employer. As the employee, you can make contributions up to the annual limit. As the employer, your business can make additional profit-sharing contributions, subject to IRS limits tied to income and compensation.
Importantly, you can own and contribute to both a traditional 401(k) and a Solo 401(k), but both are subject to the same annual contribution limit—meaning your combined pre-tax contributions to both accounts cannot exceed $24,500 in 2026. However, this limit applies only to employee deferrals, not total contributions.
Solo 401(k) Strategies
While they can certainly work in tandem, each plan may serve a slightly different purpose within your retirement savings strategy. Your traditional plan can help you capture benefits tied to your employment, including employer matching, while your Solo 401(k) allows your business income to fund its own retirement strategy, often with more flexibility and higher overall contribution potential. For many high-income business owners and 1099 earners, that flexibility is what makes advanced Roth strategies possible.
Here are a few ways to leverage a Solo 401(k) alongside your traditional plan.
Hire Your Spouse
If your spouse can contribute to the business in a legitimate, documented role, paying them a reasonable wage is one way to increase access to tax-advantaged retirement savings. As an employee of the LLC, your spouse may be eligible to contribute to the Solo 401(k) up to the annual employee deferral limit. The business can also make employer contributions on their behalf.
By including your spouse as an employee, you may be able to meaningfully increase household retirement savings while keeping your business income within the family.
Optimize Your Employer Matching
Most employers who offer 401(k)s to employees will include contribution matching to incentivize participation. Often, the matching contributions are limited to a certain percentage or dollar amount, say 3% of the employee’s salary.
If you or your spouse receives an employer match through a W-2 job, continue contributing up to the matching limit. This is essentially free money from your employer, which can compound greatly between now and retirement.
Once you reach the employer matching limit, consider then focusing your contributions on your Solo 401(k) instead. You can direct additional employee deferrals into the Solo 401(k) and layer in employer contributions from your business, essentially achieving tax-deferral benefits from both plans.
Customize Your Investment Options
Employer 401(k)s are often limited to a few predetermined funds or strategies, often target-date mutual funds. They’re trying to find the most generally beneficial solution for a wide range of people. With a Solo 401(k), however, you have the flexibility and control to create a tailored investment lineup that fits your investment needs, comfort level with risk, and timeline towards retirement. Depending on the custodian and structure, you may have access to a much broader investment universe, including ETFs, private investments, and alternative strategies.
Create Potential Tax-Free Retirement Income with Roth Conversions
Certain 401(k) plan structures allow participants to make post-tax contributions, which can be converted into Roth accounts through a Roth conversion or mega backdoor Roth conversion. Over time, this can help build a pool of tax-free retirement assets alongside traditional, tax-deferred savings. This is one of the most powerful planning opportunities available to high-income business owners and 1099 contractors.
When designed correctly, a Solo 401(k) may allow you to contribute beyond standard pre-tax limits by making post-tax contributions and converting them to a Roth. The maximum allowable contribution to a 401(k) is $72,000 in 2026. This includes both employee and employer contributions and may also include post-tax contributions depending on plan design.
Roth conversions can be technically complex and often require certain stipulations or criteria to be effective. Check with your advisor and plan provider first before pursuing a conversion.
Making the Most of Your 401(k) in 2026 and Beyond
If you tend to meet the maximum contribution limits on your workplace retirement plan before the year is over, a Solo 401(k) through your LLC could offer additional planning opportunities. This can be especially valuable for 1099 contractors and business owners who want greater control over how and where they save for retirement. If you’re considering opening and contributing to a new plan, speak with a financial advisor first. Our team at Envision can help you understand the contribution rules, investment options, tax considerations, and more. Schedule a call to get started.
Sources:
- https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
Sean Gerlin, CFP®, CPWA®, ChFC®, CLU®, is the Founder and Principal of Envision Wealth Planners, a fee-only financial advisory firm serving clients across Central Florida, including Orlando, Winter Park, Maitland, and nearby communities. Sean specializes in helping high-income families, business owners, and commercial real estate executives align their wealth with their values through a comprehensive Financial Life Planning approach. Learn more about EWP at envisionplanners.com.
This material has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.