The Solo 401(k) is the indie dev's tax shelter

The shelter most indie devs don't open

A Solo 401(k) is a retirement account for self-employed people with no full-time employees. It exists because the IRS wanted to give freelancers and solo founders the same tax treatment as W-2 employees with corporate plans. Most indie devs never set one up.

The cost of skipping it is measured in tens of thousands of dollars per year of unsheltered income.

The contribution math

In 2025, contribution limits for a Solo 401(k):

• Employee deferral: up to $23,500 (under 50) of your compensation.
• Employer contribution: up to 25% of compensation.
• Combined cap: $70,000 ($77,500 if 50+).

You are both the employer and the employee. You wear both hats. You contribute under both.

For an indie dev clearing $200k of self-employment income, that's potentially $70,000 of pre-tax (or Roth) money sheltered in a single year. At a 32% marginal federal rate, the deferral alone is roughly $22,000 in immediate tax savings.

Self-employment net	Max Solo 401(k) contribution	Approx. tax saved (32% marginal)
$80,000	$39,000	$12,500
$150,000	$58,000	$18,500
$200,000+	$70,000	$22,400

Why it beats the alternatives

A SEP-IRA caps you at 25% of compensation — no employee deferral. For a $100k indie dev, that's $25k vs. the Solo 401(k)'s ~$45k. Same paperwork. Half the shelter.

A traditional IRA caps at $7,000. Useful, but a rounding error on indie dev income.

A Roth IRA has income limits. Most successful indie devs phase out.

The Solo 401(k) is the only account that lets you shelter the full breadth of indie-dev income without an employer.

The Roth flavor

Most providers (Fidelity, Schwab, E*TRADE, Solo401k.com) offer a Roth option on the employee deferral side. You pay tax now, the money grows tax-free, withdrawals in retirement are tax-free.

For an indie dev in a low-revenue year (building a product before launch), the Roth election is usually correct. You're in a low marginal bracket today; future-you will likely be in a higher one.

For high-revenue years (post-launch, post-acquisition), the traditional pre-tax election usually wins.

The setup

It takes one afternoon.

1. Get an EIN if you don't have one (free, IRS website, ten minutes).
2. Open the account at a brokerage that supports Solo 401(k)s (Fidelity and Schwab are free).
3. Plan-document is provided by the broker. Sign it.
4. Fund it. Contribution deadline is your tax filing date plus extensions.

That's the whole setup. No payroll service, no CPA required for a basic plan.

The cost of waiting

The contribution is use-it-or-lose-it per year. Skip 2025 and the 2025 contribution slot is gone forever. There's no catch-up bucket for missed years.

Five years of skipping a $40k contribution is $200k of shelter you can't go back and claim. Plus the compound growth on it.

Open the account. Fund it. Move on.