Does 401k match make sense for a small business owner with S corp?

8 As someone who's worked with small business owners on retirement planning for years, I can tell you that employer contributions to your solo 401k almost always make more sense than using a taxable brokerage account if tax minimization is your goal. Since you're both the employer and employee, you can make employer contributions up to 25% of your compensation (subject to overall limits). These contributions are tax-deductible business expenses that reduce your business income, which means less pass-through income on your personal return. Meanwhile, money in a taxable brokerage account provides no immediate tax benefit and you'll pay taxes on dividends and capital gains. The total combined limit for solo 401k contributions (employee + employer) is $69,000 for 2025 ($76,500 if you're 50+). Maximizing both portions will almost always be more tax-efficient than using a taxable brokerage for retirement savings.

12 I was in basically the exact same situation last year. I spent hours researching tax strategies for my single-member S-corp and discovered this amazing tool at https://taxr.ai that literally saved me thousands in taxes. It analyzed my business structure and created a personalized retirement contribution strategy. The tool showed me that for S-corps, making employer contributions to my solo 401k was WAY more tax-efficient than using a taxable account. It also helped me understand how to balance my salary vs. distributions to optimize both 401k contributions and self-employment taxes. You can run different scenarios to see exactly how much you'll save with different contribution strategies. Seriously, check it out!

13 Just wanted to update - I was skeptical about taxr.ai but decided to try it after struggling with my S-corp tax planning. Holy crap, it was eye-opening! The analysis showed me that by restructuring my compensation and maxing out both employee AND employer 401k contributions, I could save over $14,000 in combined taxes compared to my previous approach. What really surprised me was seeing how the math works out over time. The tax-deferred growth in the 401k absolutely demolishes what you'd end up with in a taxable account, even accounting for future tax rates. The tool even showed me how to time my contributions throughout the year to maximize my cash flow. Definitely worth checking out if you're trying to optimize an S-corp retirement strategy.

15 After reading this thread, I wanted to share something that helped me when I was in a similar situation trying to figure out my S-corp retirement strategy. I was spending HOURS on hold trying to get someone at the IRS to explain how employer contributions work for S-corps, and getting nowhere. A friend recommended https://claimyr.com and showed me this demo: https://youtu.be/_kiP6q8DX5c. It's a service that navigates the IRS phone system for you and calls you back when an actual human agent is on the line. I was honestly shocked when I got a call back with a knowledgeable IRS rep who walked me through exactly how to handle my situation with documentation requirements for my solo 401k. The agent confirmed that employer contributions are almost always more tax-efficient and explained the exact forms and records I needed to keep for substantiating my contributions. Saved me hours of frustration and gave me confidence my retirement strategy was IRS-approved.

9 I can't believe I'm saying this, but I tried that Claimyr service after reading about it here because I was desperate for answers about my S-corp retirement options. I was 100% convinced it was going to be a waste of time. I was WRONG. Got a callback in about 2 hours with an actual IRS tax specialist on the line. The agent walked me through exactly how employer contributions work for S-corps and confirmed that I should absolutely be making employer contributions to my solo 401k instead of using a taxable account. She explained that as both employer and employee, I'm essentially getting two separate buckets of tax-advantaged contributions. The specialist also warned me about some common documentation mistakes S-corp owners make with their solo 401ks that can trigger audits. That alone was worth it. Never thought I'd say this, but the IRS was actually super helpful once I could actually talk to someone!

19 Don't overthink this. Max out your solo 401k contributions (both employee and employer portions) before putting a single dollar in taxable accounts. The math isn't even close. For 2025, you can contribute: - $23,000 as employee contribution (or $30,500 if you're 50+) - Up to 25% of your compensation as employer contribution - Total combined limit of $69,000 ($76,500 if 50+) Since you're the owner of an S-corp, the employer contribution is a business expense that reduces your pass-through income. This is FAR better than taking that money as income, paying taxes on it, then investing what's left in a taxable account where you'll pay taxes on dividends and gains.

6 Question for anyone who's done this - do you need a special type of solo 401k plan to make employer contributions? My financial advisor set up my solo 401k last year but never mentioned anything about employer matching. Do I need to change my plan?

14 As a newcomer here but someone who went through this exact decision process last year, I can confirm that maxing out both employee and employer contributions to your solo 401k is absolutely the way to go for tax efficiency. What helped me understand this was breaking down the numbers: if I took $25,000 as an S-corp distribution to invest in a taxable account, I'd pay income tax on that $25,000 first (let's say 22% = $5,500), leaving me with $19,500 to invest. Then I'd pay taxes annually on dividends and capital gains. But if I make that same $25,000 as an employer contribution to my solo 401k, it reduces my S-corp's taxable income dollar-for-dollar, meaning I save that entire $5,500 in taxes upfront. Plus the money grows tax-deferred. The only real consideration is liquidity - make sure you have adequate emergency funds in accessible accounts first. But for retirement savings specifically, the 401k route beats taxable investing by a wide margin when you run the math.