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# Individual 401(k) Plans

- Print

As a small business owner employing only owners and spouses, you may be able to contribute more with a 401(k) than with other retirement plans.

An Individual 401(k) may work well if you have income of less than $200,000 and want to maximize your retirement savings. With an Individual 401(k) you have the flexibility to change how much your business contributes from year to year.

## Eligibility to contribute

You can contribute at any age if you are self-employed or a business partner.

## Maximum annual contribution

- May use a combination of salary deferral and profit sharing contributions
- Profit Sharing: Up to the lesser of 25% of compensation or $70,000 (2025)
- Salary deferral: Up to the lesser of 100% of compensation or $23,500 (2025) [$31,000 if age 50 or over]. Beginning in 2025, the catchup for those ages 60 to 63 increases to $11,250.
- The total combination of salary deferral and profit sharing contributions may not exceed $70,000 (2025) [$77,500 age 50 and older]

## Tax-deductible contributions

As a small business owner, you can deduct your contributions for yourself, and your business partner from your company’s federal taxable income.

Your plan may now allow you to allocate part or all of your deferral to a Roth 401(k). Roth 401(k) salary deferrals are not tax deductible but contributions and earnings have the potential to grow tax deferred.

## Taxation of earnings and withdrawals

Tax-deductible contributions and earnings are taxed as ordinary income when withdrawn. Roth earnings may be eligible for income tax free withdrawals if held for five years and attaining age 59 1/2.

## Types of investments

Stocks, bonds, mutual funds and Advisory Products available through a WF Advisors brokerage account.

## Minimal initial investment

Varies by investment option

## Withdrawal penalties

10% IRS additional tax if withdrawn before age 59½ unless exception applies.

Exceptions include:

- Death
- Disability
- Substantially equal periodic payments made over life expectancy
- Termination of service after five years and reaching age 55
- Qualified military reservist
- Certain hardship withdrawals
- Up to $5,000 for qualified adoption / birth expenses

## Required withdrawals

The age to start Required Minimum Distributions (RMDs) begins at age 73.

## Deadline to set up and fund

- Individual 401(k) plans may be set up by tax filing deadlines plus extensions. Note: It can take 30 or more days to establish a plan.
- Salary deferral portion of the contribution must be deducted from a paycheck prior to year end, with some exceptions for certain business structures.
- Business owner (employer) contributions may be made up through the business’ tax filing due date plus extensions.

## Commissions and fees

Vary by account and investments

## Want to learn more about Individual 401(k) plans?

Call us at 1-877-493-4727
Investment and Insurance Products are:

- Not Insured by the FDIC or Any Federal Government Agency
- Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
- Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested

Investment products and services are offered through WF Advisors, a trade name used by WF Clearing Services, LLC and WF Advisors Financial Network, LLC, separate registered broker-dealers and non-bank affiliates of WF & Company.

WF and Company and its Affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.

Information published by WF Bank, N.A., WF Advisors, or one of its affiliates as part of this website is published in the United States and is intended only for persons in the United States.

PM-08072026-7617392.1.1

LRC-0225

## Compare our plans

Get a side-by-side comparison of our business retirement plans.

## More resources

- Expand Employee Benefits

## Still have questions?

### Call Us

WF Advisors

Brokerage Accounts

1-877-493-4727

More contact options