By Justin Gaulin
Regional Vice President, ABA Retirement Funds Program
In my day-to-day work I meet a lot of attorneys who know they need to plan for their eventual retirement but just don’t have the time or resources to explore their options. Many come from backgrounds at larger firms with 401(k) plans and assume that because they now practice alone, they don’t have access to a plan any longer. My message to them is – think again. The Internal Revenue Service (“IRS”) allows even solo practitioners to set up a tax-advantaged retirement savings plan known as a solo 401(k).
Key points
- If you’re self-employed and don’t employ others, you’re eligible to open a solo 401(k) (Note: There are also plan options for those with employees)
- If your spouse is also employed by your firm, your spouse can also contribute money to your solo 401(k).
- You can contribute money to your solo 401(k) as both an employer and employee (for example, you can match your personal contributions or provide profit sharing with firm profits).
- A solo 401(k) allows you to save on either a pre-tax basis, a Roth after-tax basis, or both.
Eligibility Requirements
To qualify for a solo 401(k), the income you intend to contribute must be produced by your firm. You should be able to verify this through your tax records. Your firm may be structured as a sole proprietorship, an LLC, a corporation, or a partnership.
How to Set up a Solo 401(k)
You can open a solo 401(k) at many online and traditional brokers, or directly through a financial services provider like the ABA Retirement Funds Program (“Program”). You’ll also need an employer identification number (“EIN”) to get started with the enrollment process. If you don’t have one already, you can apply for an EIN through the IRS. The rest of the documentation you’ll need, such as a plan document, will be provided by the broker or financial services organization you choose to manage your plan.
Traditional or Roth?
When you set up your plan document, it will constitute a written declaration of the type of plan you intend to sponsor and fund. The choices are the same as those given to an employee opening an account at their employer’s 401(k) plan. You can choose a traditional 401(k) – which allows you to save money before taxes are withheld and defer paying taxes on the money and investment earnings until you withdraw the money in retirement. Or you can choose a Roth 401(k), which allows you to save after taxes are withheld, and owe no taxes on the investment earnings with a qualified withdrawal.
Benefits of a Solo 401(k)
Solo 401(k)s provide some advantages over other types of retirement accounts available to solo practitioners – such as a Simplified Employee Pension (“SEP”) IRA, a Keogh plan, or Savings Incentive Match Plan for Employees (“SIMPLE”) IRA. Generally, these options offer no Roth savings option and allow you to save less than you could under a solo 401(k). The solo 401(k) is also the only option that lets you contribute as both an employee and an employer, providing the potential for significant tax benefits both to you personally and to your firm as a business. Solo 401(k)s also offer the opportunity to borrow from your account and typically offer more investment funds than are available in other types of plans.
Comparing Service Providers
While many financial institutions can help create retirement plans for lawyers, the Program distinguishes itself through its dedication to serving the legal profession exclusively. Unlike general financial institutions, the Program is structured with lawyers’ needs in mind, offering greater flexibility, lower costs, and specialized support.
I am happy to work with you to design the plan that best meets the needs of your practice. Please reach out (justin.gaulin@abaretirement.com, 860-384-4022) to learn more about setting up a solo 401(k) plan for your practice, at no out-of-pocket cost. The Program is a not-for-profit corporation that brings together over 3,700 law firm retirement plans to offer a platform of investments and a service package that is typically available to only the largest of corporate retirement plans.
Justin Gaulin is a Regional Vice President with the ABA Retirement Funds Program, working exclusively with law firms to simplify retirement planning and fiduciary decision making.
With 14 years of retirement industry experience, Justin is known for his consultative, long-term approach and focuses on making complex decisions easier for firm leaders and small and solo practitioners.
The ABA Retirement Funds Program has been providing affordable retirement plans to the legal community for over 60 years. It is organized as an Illinois not-for-profit corporation by the American Bar Association and is dedicated to providing retirement services exclusively to the legal community. It currently services nearly 3,900 law firm retirement plans and has approximately $7.7 billion in assets (12/31/2024).
Registered representative of and securities offered through Voya Financial Partners, LLC (member SIPC).
Voya Financial Partners is a member of the Voya family of companies (“Voya”). Voya and the ABA Retirement Funds are separate, unaffiliated entities and are not responsible for one another’s products and services.
CN5166920_0128
