How to open a Solo 401(k), step by step
Bruce Samuels
August 2, 2026
10 min read
I said in the SEP-vs-Solo comparison that I would open a Solo 401(k) before December 31 this year. This article is me doing it, with the forms in front of me and the confusing parts written down while they were still confusing. Because the opening process has a shape nobody warns you about: the account is free and the paperwork is short, but three or four small decisions hide inside it that are annoying to change later, and the forums are full of people who discovered them in the wrong order.
Here is the whole sequence, in the order that avoids backtracking.
Step 0: Confirm you are actually eligible
A Solo 401(k) is for a business with no full-time W-2 employees other than the owner and the owner's spouse. Contractors you pay on 1099 do not count against you; a part-timer under the plan's eligibility hours does not either (the threshold is set in the adoption agreement). Hire a real full-time employee and the "solo" part ends, with a required conversion to a regular 401(k). If hiring is on your one-year horizon, read the hiring section of the comparison article before opening anything.
You also need self-employment income to contribute against: sole proprietorship, single-member LLC, or partnership/S-corp compensation all qualify. A hobby with no income can technically have a plan; it just cannot put anything in it.
Step 1: Get the EIN first
Every downstream form asks for an Employer Identification Number, because a Solo 401(k) is legally an employer-sponsored plan and the employer is you. Your SSN does not substitute, even as a sole proprietor. If you do not have an EIN yet: it takes about five minutes on irs.gov, it is free, and as a bonus you stop handing your Social Security Number to every client who sends you a W-9.
Do this today even if the account opening waits for the weekend. It is the one dependency with no workaround.
Step 2: Understand the one document that matters
Whichever provider you pick, the stack of paperwork contains one document worth actually reading: the plan adoption agreement. Everything else is ordinary account-opening; this is your plan's constitution. It decides, by checkbox:
- Whether Roth deferrals are allowed. If you ever want the Roth option, it must be enabled here. Some agreements apply a default when you leave the choice blank; read which one, do not inherit it by accident.
- Whether participant loans are allowed — and here is the part that surprised me during research: neither Fidelity's nor Schwab's free standard plan document offers participant loans. The 50%-of-balance-or-$50,000 borrowing you read about is a feature of 401(k) plans whose documents provide for it, and the free prototype documents do not. Same story as the mega backdoor Roth later in this guide: if borrowing access matters to you, you need a paid custom-document provider, with the brokerage acting only as the account custodian.
- Eligibility terms (age, service hours), which matter mostly for the spouse-in-the-business case.
And one structural fact that changes how you file papers forever after: you are the plan administrator, not the brokerage. The signed adoption agreement lives in your records, not theirs. Every few years the IRS requires plan documents to be restated, and the provider will mail you an amendment to sign. That mail looks ignorable. It is not: an unamended plan can lose its qualified tax status. Make a folder, physical or digital, labeled with the plan name, and put everything in it starting now.
Step 3: The Fidelity path
Fidelity's product page (fidelity.com, "Self-Employed 401(k)") leads with an online setup, and the cost story is what the community consistently reports:
“there are no opening, closing, or annual fees for Fidelity’s Solo 401(k).”r/tax, 2026
The online path has conditions, verified against their current process: you must be both the plan administrator and the participant, a US citizen, and if you are married, your spouse must be the primary beneficiary. Meet all three and the whole thing happens on the site, with e-signatures on the plan documents; miss any and you drop to printable paper forms mailed or uploaded. Either way expect the account to be fully open in a few business days to two weeks, so December 28 is a bad day to start.
Two Fidelity-specific notes. Roth deferrals are supported on the current documents (this was not always true; old forum threads that say Fidelity has no Roth are describing the past). And the loan checkbox from Step 2 does not exist here: Fidelity's standard plan has no participant loans, full stop. Schwab's free plan does not have them either, so if borrowing is a dealbreaker, your path is a paid custom-document provider, not a different free brokerage.
Step 4: The Schwab path
Schwab's version ("Individual 401(k)" in their retirement menu) is famous for a piece of navigation confusion the forums keep re-asking:
“How do I open a Solo 401k with Schwab? I don’t see the option for Open an account”r/tax, 2026
The answer: the Individual 401(k) is under small-business retirement plans, not the regular "open an account" flow, and part of the process runs on forms rather than a pure web signup. The application itself takes about 15-20 minutes. Then comes the part that confuses nearly everyone, verbatim from someone mid-process:
“With Schwab I have to open a brokerage account in addition to the Roth and Traditional solo 401k accounts.”r/tax, 2026
That is not a mistake on their end. If you enable Roth deferrals, Schwab's structure holds pre-tax and Roth money in separate accounts under one plan, so you complete one adoption agreement plus an account application for each bucket. Two account numbers, one plan. It reads like duplicate paperwork; it is actually the cleaner ledger, because Roth and traditional dollars must never mix.
Like Fidelity, Schwab's standard plan does not offer participant loans; the two-account structure above is the real structural difference between the two, not features. Fees for the basic plan: none, same as Fidelity. For feature-by-feature current details, the provider comparison stays updated, including the newer entrants filling the space Vanguard left when it exited the solo business.
Step 5: The deadline math for opening
Consistent with the deadline rules covered in the comparison, condensed to the opening decision:
- Cleanest: open by December 31 of the tax year. Everything (deferrals, employer contributions) stays simple.
- Still possible after year-end: under SECURE 2.0, a sole proprietor's first plan year can be established up to the unextended filing deadline (April 15), and that first year's employee deferral can be made by the same date. Extensions extend employer contributions, not the deferral.
- Practical translation: if you are reading this in November, start now; the paperwork turnaround (days to two weeks) eats calendar. If you are reading this in February wishing you had a plan for last year, you are, as of SECURE 2.0, not out of luck — but move.
Variations: S-corp owners and working spouses
The steps above assume a sole proprietor or single-member LLC, which is most readers. Two common variations change the numbers, not the process.
If your business is an S-corp, your contributions run off your W-2 wages from the company, not Schedule C profit. Employee deferrals come out of payroll like any job's 401(k), and the employer contribution is a clean 25% of W-2 wages: the 20%-effective-rate haircut that Schedule C filers get from the SE-tax adjustment does not apply to you, because your compensation is already wages. The catch cuts the other way: only W-2 wages count, so an S-corp owner running a minimal salary to save on payroll tax is also shrinking their own contribution ceiling. The two goals pull against each other, and that trade belongs in the S-corp timing decision, not in a checkbox.
If your spouse works in the business with real compensation, they can join the same plan with their own employee deferral (their own $24,500 in 2026) plus an employer contribution on their pay. That is the one legal way to roughly double a household's Solo 401(k) capacity, and the paperwork is one more participant application under the same adoption agreement. The word doing the work in that sentence is "real": pay documented, work performed, reasonable for the role. A spouse on the plan with no actual compensation history is an audit conversation waiting to happen.
Rolling old accounts into it (and the mega backdoor question)
A Solo 401(k) can usually accept incoming rollovers from old employer 401(k)s and traditional IRAs; both mainstream free plans handle this through a rollover/transfer form, and it is worth checking the box on that capability before you choose, because consolidation is quietly one of the account's best features. Two reasons people do it. The obvious one: fewer orphaned accounts from old jobs. The subtler one: moving pre-tax IRA money into the Solo 401(k) clears the way for clean backdoor Roth IRA contributions, because the pro-rata rule that taxes backdoor conversions only counts money sitting in IRAs, not in 401(k)s. If that sentence solved a problem you have, you already know; if it read as noise, you can ignore it for years without cost.
While we are near the topic, the term you will meet on every forum: the mega backdoor Roth, which stacks after-tax contributions on top of the normal limits and converts them to Roth. Understand one thing before you want it: the free Fidelity and Schwab prototype plans do not support it, because it requires after-tax (non-Roth) contributions and in-plan conversions their standard documents do not offer. That gap is exactly the market for the paid custom-document providers in the provider comparison. For most side hustlers the normal $72,000 ceiling is not the binding constraint, and the free plans are the right answer; know which problem you actually have before paying to solve the other one.
Step 6: After it opens (the part nobody writes about)
Making a contribution is two decisions, not one. Every dollar you send must be designated as either an employee deferral or an employer contribution, at deposit time. The transfer screens have a dropdown for it. This is not cosmetic: the two buckets have different limits, different deadlines, and (if you enabled Roth) different tax character options. Sloppy designation is un-messable but painful; deliberate designation is a ten-second dropdown.
Nobody polices your limits but you. The brokerage cannot see your day job's 401(k) deferrals or your actual self-employment income, so it will cheerfully accept contributions you are not entitled to make. The shared employee-deferral limit across all plans ($24,500 in 2026) and the 25%-of-adjusted-net employer formula are your homework; the income-tier tables have the math worked at several income levels. Reconcile once, before filing season, while fixes are cheap.
The money arrives as cash and stays as cash until you invest it. An opened, funded Solo 401(k) holding uninvested cash is a common quiet failure. What to invest in is a different article and a different kind of decision; that's territory where I'll say "diversified, boring, low-fee" and hand you to the retirement accounts overview rather than play advisor.
Calendar two future obligations now. One: the plan-restatement mail from Step 2, whenever it comes, gets signed and filed, not recycled. Two: once the plan balance passes $250,000, Form 5500-EZ becomes an annual filing; it is a 15-minute form, and the penalty for not knowing it exists is ugly out of all proportion, so a note in your tax-season checklist today costs nothing.
The checklist version
[ ] Eligibility: no full-time W-2 employees (spouse OK) [ ] EIN in hand (irs.gov, ~5 minutes, free) [ ] Provider picked; if loans matter: neither free plan has them, budget for a paid provider [ ] Adoption agreement: Roth checkbox read and chosen on purpose [ ] Application(s) submitted (Schwab Roth = 2 account applications; normal) [ ] Plan folder created; adoption agreement filed in it [ ] First contribution: designated employee vs employer in the dropdown [ ] Limits tracked by YOU (shared $24,500 deferral cap across all 401(k)s) [ ] Cash actually invested, not parked [ ] Calendar: restatement mail = sign it; $250K balance = 5500-EZ annually
Not Sure Solo 401(k) Is Your Account?
The SEP IRA takes ten minutes and no plan documents; the Solo 401(k) shelters dramatically more at most side-hustle incomes. The comparison walks the trade at every income level.
SEP IRA vs Solo 401(k) →FAQ
Do I need an EIN to open a Solo 401(k)?
Yes, and do it first because every form downstream asks for it. Five minutes on irs.gov, free.
What does the adoption agreement actually decide?
It is your plan's constitution: eligibility terms, whether Roth deferrals are allowed, whether loans are allowed. Read the checkboxes instead of inheriting defaults. And because you are the plan administrator, the signed copy is yours to keep, and the periodic restatement amendments the provider mails are yours to sign; an unamended plan can lose its qualified status.
Can I open one entirely online?
At Fidelity, yes if you are administrator and participant, a US citizen, and name your spouse primary beneficiary when married; otherwise paper forms. At Schwab, the application takes 15-20 minutes with an adoption agreement plus one account application per money type (two if you enable Roth). Both take days to a couple of weeks to fully open, which is the real reason not to start on December 28.
Who keeps track of my contribution limits?
You. The brokerage cannot see your other 401(k)s or your actual self-employment income, so it will not stop an excess contribution. The $24,500 employee deferral cap (2026) is shared across every 401(k) you have; the employer side runs on your net self-employment income. Designate every deposit as employee or employer in the transfer screen's dropdown, and reconcile your totals once before filing season. Excess contributions are fixable but the fix has paperwork and deadlines of its own, so the ten seconds of dropdown discipline is the cheap path.