Self-employed Real Estate Professionals, too, can have a 401(k)

Real Estate professionals who are considered self-employed may love the flexible nature of their job, but are often envious of corporate worker’s access to a 401(k) plan. Well, there is good news. Self-employed individuals, like many Real Estate Agents and Brokers, also have the privilege of saving for retirement with a 401(k) plan.

The plan is commonly called a solo-401(k) or an individual 401(k). If you don’t have any employees, the plan is very simple to manage because you are exempt from the burdensome nondiscrimination testing that is required of multi-participant 401(k) plans.

Like normal 401(k) plans, your total contribution is made up of an employee contribution and a contribution by the employer. As a self-employed individual, you wear both hats: employee and employer. You can contribute:

  • Elective deferral: 100% of compensation up to an $18,000 limit in 2017, and:
  • Employer non-elective contribution: up to 25% of compensation (defined as your net earnings after one-half of your self-employment tax and your elective deferral).

The 401(k) can allow a Real Estate professional to save up to $54,000 per year (or $60,000 if over 50). This allows for the potential to save significantly more than traditional IRAs or Roth IRAs, which have $5,500 annual contribution limits.

It is important to realize that a 401(k) might not be your best option. Depending on your age, income level, objectives, and amount you wish to save, there are several other retirement savings options available. SEP IRAs allow participants to contribute as much as 25% of their net earnings, up to $54,000. Simple IRAs allow for a potential of $20,000 per year ($23,000 if over 50) of savings.

It is recommended to contact a financial or tax professional to determine which plan fits your needs. Additionally, more information about these plans can be found on the IRS website.

Note: This blog contains 2017 IRS limits. For updated limits, visit

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