Solo 401(k) vs. Keogh: Which Retirement Plan Is Best for the Self-Employed?

When it comes to retirement savings for self-employed individuals and small business owners, choosing the right plan can significantly impact long-term financial security. Two of the most common options are the Solo 401(k) and the Keogh plan. Both offer valuable tax advantages and high contribution limits, but they differ in flexibility, complexity, and eligibility.

This article compares the Solo 401(k) and Keogh plan in detail, covering their key features, benefits, drawbacks, and which type of self-employed professional each plan best suits.

What Is a Solo 401(k)?

A Solo 401(k) (also known as an Individual 401(k) or One-Participant 401(k) plan) is designed for self-employed individuals or business owners without employees (other than a spouse or other business owner). It functions similarly to a standard 401(k) but allows the account holder to contribute as both employee and employer.

Key Features:

• Eligibility: Available to anyone with self-employment income and no ineligible employees.
• Contribution Limits (2025):
  • Employee: Up to $23,500 ($31,000 if age 50+).
  • Employer: Up to 25% of compensation, with a combined maximum of $70,000 ($77,500 if age 50+).
• Tax Advantages:
  • Pretax or Roth contributions.
  • Tax-deferred investment growth.
• Investment Flexibility: Wide range of options, including real estate, private businesses, and cryptocurrencies.
• Administrative Requirements: Minimal paperwork; Form 5500 required only if assets exceed $250,000.

What Is a Keogh Plan?

A Keogh plan (or HR-10 plan) is a tax-deferred retirement plan for self-employed individuals and small businesses, including partnerships. While once popular, it has declined in use due to the rise of simpler plans like the Solo 401(k) and SEP IRA.

Key Features:

• Eligibility: Available to self-employed individuals and partnerships; can include employees.
• Types of Keogh Plans:
  • Defined Contribution: Similar to profit-sharing or money-purchase plans.
  • Defined Benefit: Operates like a traditional pension with fixed annual contributions.
• Contribution Limits (2025):
  • Defined Contribution: Up to 25% of compensation (max $70,000).
  • Defined Benefit: Contributions based on actuarial calculations—often much higher.
• Tax Advantages:
  • Tax-deductible contributions.
  • Tax-deferred growth.
• Administrative Requirements:
  • Formal plan document required.
  • Annual IRS reporting via Form 5500.
  • Typically higher administrative costs.

Solo 401(k) vs. Keogh Plan: A Detailed Comparison

Feature	Solo 401(k)	Keogh Plan
Eligibility	Self-employed individuals with no employees (except spouse)	Self-employed individuals or partnerships; can include employees
Contribution Limits (2025)	Up to $70,000 ($77,500 if 50+)	Up to $70,000 for defined contribution; higher for defined benefit
Employee Contributions	Yes – up to $23,500 ($31,000 if 50+)	Not applicable
Tax Benefits	Pretax or Roth options, tax-deferred growth	Tax-deductible, tax-deferred growth
Investment Options	Broad, including alternative assets	Broad, but may have restrictions
Administrative Burden	Low	Moderate to high
Best For	Solo entrepreneurs and freelancers	Businesses with employees or pension-seekers

Pros and Cons

Solo 401(k) Pros:

✔ High contribution limits with both employee and employer contributions.
✔ More investment flexibility, including real estate and alternative assets.
✔ Roth contribution option for tax-free withdrawals in retirement.
✔ Lower administrative burden than Keogh plans.

Solo 401(k) Cons:

✖ Only available for businesses with no employees (except a spouse or business partner).
✖ Must file IRS Form 5500 once assets exceed $250,000.

Keogh Plan Pros:

✔ Higher potential contributions with a defined benefit structure.
✔ Suitable for businesses with employees.
✔ Allows for a structured pension-like plan with predictable retirement benefits.

Keogh Plan Cons:

✖ Higher administrative complexity and costs.
✖ Requires annual IRS filings and actuarial calculations (for defined benefit plans).
✖ Less flexibility than Solo 401(k) for self-employed individuals without employees.

Which Plan Should You Choose?

Choose a Solo 401(k) if you’re a freelancer, independent contractor, or small business owner without employees who wants maximum contribution flexibility and minimal paperwork.

Choose a Keogh plan if you have employees or want to establish a defined benefit plan for predictable retirement income and higher contribution potential.

Final Thoughts

For most self-employed professionals, the Solo 401(k) remains the more efficient and flexible choice. It combines high contribution limits, tax advantages, and broad investment options with lower administrative costs. However, for business owners with employees or those seeking a structured pension, a Keogh plan can still be a powerful tool.

Before deciding, consult with a retirement expert or tax advisor to ensure your plan aligns with your income, business goals, and long-term retirement strategy.

Which retirement plan fits your business?

Deciding between a Solo 401(k) and a Keogh plan can be confusing — each has different rules, tax implications, and contribution limits. Get expert help to assess which option meets your retirement goals and business structure most efficiently.

👉 Schedule a Free Consultation
👉 Open an Account

Invest Freely. Retire Confidently.

---

Frequently Asked Questions