How much can an owner put in a retirement plan?

How the numbers are built

One set of 2026 figures drives every line. Employee deferrals are $24,500, catch-up is $8,000 from age 50, and ages 60 to 63 use $11,250 instead. SIMPLE deferrals are $17,000, with catch-up of $4,000, or $5,250 at ages 60 to 63. The section 415(c) cap on annual additions is $72,000 and does not include catch-up. Compensation counted for the employer percentage stops at $360,000. The Social Security wage base is $184,500. Each half of Social Security tax is 6.2 percent up to that base, and each half of Medicare tax is 1.45 percent with no wage cap. Self-employment tax uses 12.4 percent and 2.9 percent on 92.35 percent of net profit, and only half of that tax is subtracted before the plan math. The extra 0.9 percent Medicare tax is not in the slider.

For an S corporation or a C corporation, the employer profit share is 25 percent of W-2 wages, and the deferral plus that profit share cannot pass the lower of $72,000 and the wages. For a sole proprietorship, the same 25 percent is 20 percent of net earnings after half the self-employment tax, which is the Publication 560 equivalent, and the contribution also has to fit inside those earnings. A SEP is the employer piece only, so it can use the full $72,000 with no deferral. The SIMPLE line uses a 3 percent match, capped at the amount deferred. The 2 percent nonelective option is shown beside it and is not added on top.

The wage that fills the $72,000 cap, with a full $24,500 deferral and a 25 percent profit share, is $190,000. Catch-up sits on top and does not raise that wage. For a sole proprietor the matching earnings figure, after half the self-employment tax, is $237,500. A spouse on payroll is a separate employee, with a separate $72,000 cap and the same age for catch-up.

A worked example

An S corporation owner, age 55, with W-2 wages of $200,000, no spouse on payroll, and no other employees. The marginal federal rate in the example is 32 percent and the state rate is 3.99 percent, the North Carolina rate for tax years after 2025. The solo 401(k) is a deferral of $24,500, catch-up of $8,000, and an employer profit share of $47,500, $80,000 in all. A SEP at 25 percent of wages is $50,000. A SIMPLE is a deferral of $17,000, catch-up of $4,000, and a match of $6,000, $27,000 in all. The illustrative cash balance band at this age is $180,000 to $300,000. Tax deferred on the solo total, at those rates, is about $28,792. That is a deferral, not a savings. Raising the W-2 from $200,000 to $250,000 adds about $1,450 of Social Security and Medicare tax, both halves, and $0 of extra contribution room, because the $72,000 cap is already full.

For a longer look at cash balance plans next to a 401(k), see what a cash balance plan lets an owner contribute. If a sale is the reason for the plan, the business sale calculator shows what is left after tax.

Questions owners ask

Can S corporation distributions fund a solo 401(k)?

No. For an S corporation owner who works in the business, compensation for a solo 401(k) is W-2 wages, not distributions. The IRS treats an officer who provides services as an employee, and those wages are the pay that counts. See the IRS page on S corporation compensation.

What is the 2026 solo 401(k) limit?

The employee deferral is $24,500. Catch-up is $8,000 at age 50 and over, or $11,250 at ages 60 to 63, and it replaces the $8,000 rather than stacking on it. Employer profit sharing is generally 25 percent of W-2 wages, or 20 percent of net self-employment earnings after half the self-employment tax. All of that, except catch-up, stops at $72,000 or at 100 percent of compensation, whichever is less. The compensation counted for the percentage stops at $360,000.

How is a SEP IRA different from a solo 401(k)?

A SEP is employer money only. There is no employee deferral and no catch-up. At the same wages, a solo 401(k) is often larger because the deferral and the profit share both count, until the $72,000 cap. A SEP can still be the simpler plan, and the right choice depends on employees, cash in the business, and what your CPA says about the deduction.

What if the company has employees other than a spouse?

A solo 401(k), also called a one-participant 401(k), is for a business whose only employees are the owners and their spouses. Other employees mean a company plan, and a company 401(k) has nondiscrimination testing. This page still shows the dollar limits as if there were no other employees, and it labels them that way. It is not the amount you can put away.

Is the cash balance range the contribution I can make?

No. The range is illustrative, for a high earner near the compensation cap, so you can see the scale next to a 401(k). An actuary sets the real pay credit from age, pay, the plan formula, interest rates, and the employees in the plan. The 2026 defined benefit dollar cap is $290,000 of annual benefit, which is not the same figure as a pay credit. The business has to fund the plan every year, including for eligible employees.

Does a higher S corporation salary always add contribution room?

No. Once wages are high enough to fill the $72,000 annual additions cap, more salary adds Social Security and Medicare tax and does not add 401(k) room. Catch-up does not raise the wage needed to fill that cap. The extra 0.9 percent Medicare tax on high earners is left out of the slider and is employee-only.