2027 401(k) and IRA Contribution Limits for the Self-Employed

For 2026 the 401(k) employee deferral limit is $24,500, the IRA limit is $7,500, and total solo 401(k) contributions can reach $72,000 before catch-ups. The 401k limit for 2027 is expected to rise, with Milliman projecting $25,500, but the IRS normally announces the official figure in early November. Self-employed people get the biggest benefit, because they can contribute as both employee and employer.

This guide lists the confirmed numbers, shows what to expect for 2027, and walks through the math for a sole proprietor and an S corporation owner. It is general information, not tax advice; a tax professional can confirm the right plan for you.

2027 401(k) limit: confirmed 2026 numbers and the 2027 outlook

The IRS announced the 2026 limits in its release 401(k) limit increases to $24,500 for 2026. The 2027 limits had not been released at the time of writing. Benefits consultants such as Milliman have published forecasts based on inflation data.

Limit	2026 (confirmed)	2027 (status)
401(k) employee deferral	$24,500	Projected $25,500 (Milliman); not yet official
Catch-up, age 50+	$8,000	Projected unchanged at $8,000
Super catch-up, ages 60-63	$11,250	Projected $11,750
Total annual additions (415(c))	$72,000	Pending IRS announcement
Compensation limit	$360,000	Pending IRS announcement
IRA contribution	$7,500	Pending IRS announcement
IRA catch-up, age 50+	$1,100	Pending IRS announcement
SIMPLE IRA deferral	$17,000	Pending IRS announcement

Do not lock your 2027 payroll deferrals or automatic transfers to a projected number. Set them to the 2026 level and raise them once the official figure is out.

How a solo 401(k) works for the self-employed

A solo 401(k), also called an individual 401(k), is a regular 401(k) for a business with no employees other than the owner and a spouse. You wear two hats:

• Employee deferral: up to the annual limit ($24,500 in 2026), pre-tax or Roth, regardless of profit level as long as you have that much net earnings.
• Employer profit-sharing contribution: up to 25% of compensation. For a sole proprietor or single-member LLC, compensation is net earnings after subtracting half of self-employment tax and the contribution itself, which works out to about 20% of net profit after the SE tax adjustment.

Both parts together cannot exceed the 415(c) limit ($72,000 for 2026), with age-based catch-ups added on top. If you are choosing between plan types, our comparison of a solo 401(k) vs SEP IRA shows when each wins.

Solo 401(k) vs SEP IRA vs SIMPLE IRA at a glance

Feature	Solo 401(k)	SEP IRA	SIMPLE IRA
Employee deferral	Yes, $24,500 (2026)	No	Yes, $17,000 (2026)
Employer contribution	Up to 25% of pay	Up to 25% of pay	3% match or 2% nonelective
Max total (2026, before catch-up)	$72,000	$72,000	Much lower
Catch-up, age 50+	$8,000	None	$4,000
Roth option	Yes	Yes, if provider allows	Yes, if provider allows
Best for	Owner-only businesses	Simple setup, variable profit	Small teams with employees

If you have employees, a solo 401(k) is not an option. Our guide to the SIMPLE IRA for small business covers the team-friendly alternative.

Worked example: a sole proprietor's maximum contribution

An illustrative case: a 45-year-old web consultant operating as a single-member LLC has $120,000 of net Schedule C profit in 2026.

1. Self-employment tax: $120,000 x 92.35% x 15.3% = $16,955.
2. Half of SE tax: $8,478.
3. Net earnings for plan purposes: $120,000 - $8,478 = $111,522.
4. Employer contribution: 20% x $111,522 = $22,304.
5. Employee deferral: $24,500.
6. Total: $22,304 + $24,500 = $46,804, well under the $72,000 cap.

Scenario	Solo 401(k)	SEP IRA
Age 45, $120,000 profit	$46,804	$22,304
Age 52, same profit	$54,804	$22,304
Age 61, same profit	$58,054	$22,304

At a 24% marginal income tax rate, the $46,804 pre-tax contribution saves roughly $11,200 of federal income tax. It does not reduce self-employment tax, which is calculated before retirement contributions.

Example for an S corporation owner

If your business is taxed as an S corporation, contributions are based on your W-2 salary, not total profit. With an $80,000 salary, the company can contribute 25% x $80,000 = $20,000 as employer, and you can defer $24,500, for $44,500 in total. A very low salary limits your contribution, one of several trade-offs covered in our comparison of an S corp vs LLC.

IRA limits and how they fit with a business plan

You can contribute to an IRA on top of a solo 401(k) or SEP. The 2026 IRA limit is $7,500 plus $1,100 catch-up at 50+. Two income tests matter:

• Traditional IRA deduction: If you are covered by a workplace plan, which includes your own solo 401(k) or SEP, the deduction phases out between $81,000 and $91,000 of modified AGI for single filers in 2026, and $129,000 to $149,000 for joint filers.
• Roth IRA eligibility: For 2026, direct Roth contributions phase out between $153,000 and $168,000 for single filers and $242,000 to $252,000 for joint filers.

Above those ranges, a Roth option inside your solo 401(k) is often the cleaner way to get tax-free growth.

Step by step: opening and funding a solo 401(k)

1. Confirm eligibility: self-employment income and no common-law employees, other than a spouse working in the business.
2. Get an EIN if you do not have one; most providers require it. See how to get an EIN.
3. Choose a provider and decide whether you want a Roth deferral option and loans.
4. Sign the plan document before the provider's deadline, ideally well before December 31.
5. Make a written deferral election for the employee portion.
6. Deposit contributions. Sole proprietors often fund deferrals as profit comes in; employer contributions can wait until the tax filing deadline, including extensions.
7. Watch the $250,000 threshold. Once plan assets exceed $250,000 at year-end, you generally must file Form 5500-EZ.

Common mistakes

• Counting the deferral limit twice. The $24,500 limit is per person across all 401(k) and 403(b) plans. If you also defer at a day job, your solo 401(k) deferral room shrinks.
• Using gross revenue instead of net profit. Contributions are based on net earnings after expenses and half of SE tax.
• Missing the plan setup deadline. Providers need time to process documents.
• Forgetting cash flow. A large year-end contribution is useless if clients have not paid. Chase open invoices before you commit to a number; tracking self-employed tax deductions alongside contributions gives a clearer picture of your tax bill.

Roth or traditional contributions?

Most solo 401(k) providers now let you make employee deferrals as Roth, and SECURE 2.0 also allows employer contributions to be designated as Roth (taxable now, tax-free later). The choice comes down to your tax rate today versus in retirement.

Situation	Usually favors	Why
Low-income year (new business, sabbatical)	Roth	Pay tax at 10% or 12% now instead of possibly more later
Peak earning years in the 24% bracket or above	Traditional	Deduction is worth more today
Income near the QBI phase-out range	Traditional	Lowering taxable income can preserve the QBI deduction
Uncertain about future rates	Split	Tax diversification gives flexibility in retirement

Roth deferrals do not reduce your current taxable income, so they will not help with this year's bill, but they also do not count toward required minimum distributions from a Roth 401(k) under current rules.

If you also have a day job with a 401(k)

Many freelancers start their business while still employed. The employee deferral limit is personal and shared across every 401(k) you participate in, but the employer contribution limit applies separately to each unrelated employer's plan.

Illustrative: Jordan defers $15,000 at a day job in 2026 and earns $40,000 of net self-employment profit on the side.

• Remaining employee deferral room: $24,500 - $15,000 = $9,500 in the solo 401(k).
• Employer contribution: about 20% of net earnings after half of SE tax. $40,000 - $2,826 = $37,174, so about $7,435.
• Total solo 401(k): about $16,935, on top of whatever the day-job employer contributes.

Track deferrals across both plans yourself; neither employer can see the other's numbers, and excess deferrals must be withdrawn by April 15 of the following year to avoid double taxation.

Hiring your spouse

If your spouse genuinely works in the business and is paid wages, they can participate in the same solo 401(k), with their own deferral limit and employer contribution. That can roughly double the household's tax-advantaged savings. The wages must be reasonable for the work done, and they carry payroll taxes, so run the numbers before setting this up.

What to do while 2027 limits are pending

Keep 2027 deferrals at the 2026 level, then raise them in January if the IRS confirms a higher limit. If you plan to open an HSA too, the 2027 HSA limits are already final; see our guide to 2027 HSA contribution limits. Finally, keep the invoices and bank records that support your net profit, since your contribution limit is only as defensible as the income behind it.

Turn invoices into retirement savings

Maximizing a solo 401(k) starts with getting paid on time. Send clear invoices with due dates, track what is outstanding, and move a set percentage of each payment into your retirement account. You can create invoices with our free invoice generator, no sign-up needed, and download them as PDF to send right away.