Can I avoid Social Security earnings limit by contributing to solo 401k? Early retirement question

Yes, you can absolutely reduce your countable income for the Social Security earnings test by making contributions to a solo 401(k)! This is because SSA looks at your gross earnings AFTER business deductions, which includes your contributions to qualified retirement plans. The earnings test looks at your net earnings from self-employment, not your gross revenue. So contributions to a solo 401(k) would reduce the income that counts toward that $23,080 limit for 2025. This is one of the best strategies for self-employed early retirees to maximize both their income and SS benefits before reaching full retirement age. Just make sure you properly set up the solo 401(k) and follow contribution limits.

my brother tried this last year with his plumbing business and it WORKED!!! made like 45k but only counted like 22k after all the stuff he put in retirement and some business expenses. SS never reduced his checks at all. good luck!!!

Be very careful here. While retirement plan contributions can reduce your countable income for the earnings test, it's more complicated with self-employment. The Social Security Administration looks at your net earnings from self-employment, which is calculated differently than taxable income. For self-employment, they take your net profit (after business expenses) and multiply by 0.9235 to determine countable earnings. Solo 401(k) contributions are indeed business deductions that reduce this amount. I'd recommend speaking directly with a Social Security representative to confirm how they'll treat your specific situation. The calculations can get tricky, especially with self-employment income.

I've been in your exact situation! The short answer is YES - solo 401k contributions reduce your countable income for the earnings test. I was able to continue my side business after early retirement by using this strategy. When you're struggling to get through to SSA for confirmation (and we all know how impossible their phone lines are), try Claimyr.com - it's a service that gets you through to a real SSA agent without the endless waiting. I used their service to confirm this exact question last year and had an answer in under 30 minutes. They have a video showing how it works at https://youtu.be/Z-BRbJw3puU Just make sure you document everything carefully. The key is that contributions to a solo 401k are considered business expenses that reduce your net earnings from self-employment.

whats the difference between solo401k and regular 401k? i thought u need employees to have 401k

Wait I'm confused. Isn't SSI different from regular Social Security? Does the earnings limit apply to both? I get SSDI and they told me different rules apply for disability vs retirement benefits.

THE WHOLE SYSTEM IS RIGGED! Why should we be penalized for working at all?? I took early retirement at 62 also and lost THOUSANDS because I worked part-time. The government STEALS our money after we paid in our whole lives!!! The earnings limit is THEFT plain and simple!!

Thank you everyone for the helpful information! I've learned so much about how this works. To summarize what I understand now: 1. Solo 401k contributions CAN reduce my countable income for the SS earnings test 2. As a self-employed person, SSA looks at my net profit after business deductions 3. I need to be careful with documentation and might want to confirm with SSA directly 4. This strategy is legal and specifically helpful for self-employed early retirees I'm going to set up a solo 401k and aim to keep my countable income under the limit. This will let me grow my online business without worrying about benefit reductions. Really appreciate all the guidance!

Just wanted to add that timing matters too! If you're planning to make solo 401k contributions to stay under the earnings limit, make sure you actually make those contributions during the tax year, not just plan to make them. SSA looks at actual contributions made, not just intended ones. Also, don't forget about the quarterly estimated tax payments if your business income is picking up. Since you're self-employed, you'll want to stay current with those to avoid penalties, especially if you're contributing large amounts to the solo 401k. One more thing - if your collectibles business really takes off, you might want to consider whether incorporating (LLC or S-Corp) could provide additional tax advantages, though that's a whole different conversation with more complexity. Sounds like you've got a solid plan though! The solo 401k strategy is definitely one of the best ways for self-employed folks to manage the early retirement earnings limit.

As someone who went through this exact situation two years ago, I can confirm this strategy works beautifully! I was earning around $38k from my freelance consulting business and was worried about losing SS benefits after taking early retirement at 62. My accountant set up a solo 401k and I was able to contribute $15k, bringing my countable earnings down to $23k - right under the limit. The key things I learned: 1. Set up the solo 401k BEFORE the end of the tax year you want to make contributions 2. You can contribute up to 25% of your net self-employment income (after the SE tax deduction) 3. Keep meticulous records - I track every business expense and retirement contribution 4. The solo 401k also reduces your self-employment tax, so it's a double win The peace of mind knowing I can keep working without losing benefits has been incredible. Just make sure you work with someone who understands both the SSA rules AND the solo 401k contribution limits - they're not the same thing and you want to maximize both benefits. Your collectibles business sounds like it has great potential - this strategy will let you grow it without the stress of benefit reductions!

This is such valuable information for anyone in early retirement! I'm 64 and considering starting a small consulting business but was worried about the earnings limit. Reading through all these responses has really opened my eyes to the solo 401k strategy. One thing I'm curious about - for those of you who have successfully used this approach, how do you handle the timing of income and contributions throughout the year? Do you make quarterly contributions to stay under the limit as you go, or do you wait until the end of the year to see your total income and then make a lump sum contribution? I'm thinking it might be safer to make regular contributions throughout the year to avoid accidentally going over the limit, but I'm not sure if that's the most practical approach. Would love to hear how others have managed this timing issue!

I'm in a similar boat - just turned 62 and considering claiming early SS while keeping my small photography business running. This thread has been incredibly enlightening! The solo 401k strategy sounds like exactly what I need. One question I haven't seen addressed yet: if you're already receiving SS benefits and then set up a solo 401k mid-year, how does that affect the earnings test calculation? Do they look at your earnings from the entire year, or just from when you started receiving benefits? Also, for anyone who's done this - how long did it take to actually set up the solo 401k? I'm worried about timing if I need to get it established quickly to make contributions for this tax year. Thanks to everyone sharing their experiences - this is exactly the kind of real-world advice that's impossible to find anywhere else!

This has been such an informative thread! As someone who's been hesitating about claiming early SS benefits at 62 because of my part-time bookkeeping business, I'm now seriously considering it thanks to learning about the solo 401k strategy. I had no idea that retirement plan contributions could reduce your countable income for the earnings test - my financial advisor never mentioned this option! It sounds like this could be a game-changer for many of us who want to keep working in some capacity after claiming early benefits. For those who have successfully implemented this approach, did you find that financial advisors were familiar with this strategy, or did you have to educate them about how it works? I'm wondering if I should specifically look for someone who specializes in Social Security planning and self-employment tax issues. Also, this might be a basic question, but if you're contributing to a solo 401k to stay under the earnings limit, are you still able to take advantage of other business deductions (home office, equipment, etc.) on top of the retirement contributions? It seems like maximizing all possible deductions would be key to making this strategy work effectively. Thank you all for sharing your experiences - this community is an incredible resource for navigating these complex decisions!

This thread has been absolutely incredible - thank you all for sharing such detailed real-world experiences! I'm 63 and have been putting off claiming SS benefits because I wasn't sure how to handle my small Etsy craft business earnings. Reading through everyone's experiences with the solo 401k strategy has given me the confidence to move forward. One thing I want to emphasize for other newcomers like me: the peace of mind aspect of this approach is huge. I've been stressed for months about the earnings limit, constantly calculating and recalculating my projected income. Knowing that I have this tool to manage my countable earnings takes so much pressure off. For anyone just learning about this strategy, here are the key takeaways I'm noting: - Solo 401k contributions reduce your net self-employment earnings for SSA purposes - You need to establish the plan by Dec 31 but can contribute until tax filing deadline - Keep detailed records of everything - Consider working with a professional who understands both SSA rules and self-employment tax I'm planning to set up my solo 401k next week and claim my benefits in the new year. This community has been more helpful than any financial advisor I've spoken with - thank you all for sharing your knowledge and experiences!

As a newcomer to this community, I just wanted to say how incredibly helpful this entire discussion has been! I'm 62 and was completely unaware that solo 401k contributions could help with the Social Security earnings limit situation. I run a small online tutoring business and have been avoiding claiming my SS benefits because I was worried about the earnings test. Reading through everyone's real experiences - especially hearing from people like Anastasia who actually went through this process successfully - has been more valuable than all the generic advice articles I've read online. The level of detail shared here about timing, record-keeping, working with the right professionals, and the actual mechanics of how SSA calculates net earnings is exactly what I needed to hear. I'm particularly grateful for the warnings about keeping meticulous documentation and the tips about finding advisors who specialize in both SSA rules and self-employment tax issues. I'm planning to start the solo 401k setup process next week. This thread has given me the confidence to move forward with claiming my benefits while continuing to grow my tutoring business. Thank you all for creating such a supportive and informative community for those of us navigating these complex early retirement decisions!

This is such a fantastic resource! I'm 62 and just started receiving SS benefits last month, but I've been hesitant to pursue some freelance graphic design opportunities because I was terrified of accidentally going over the earnings limit. Reading through everyone's experiences with the solo 401k strategy has been eye-opening. I had heard about solo 401ks before but never understood how they could help with the Social Security earnings test. The fact that contributions count as business deductions that reduce your net self-employment income makes perfect sense now! I'm particularly grateful for the practical tips shared here about timing (establishing the plan by Dec 31st), record-keeping, and finding the right professionals to work with. As someone who's been out of the workforce for a few years, navigating all these rules felt overwhelming, but this community has made it seem much more manageable. I'm planning to contact Fidelity next week to set up a solo 401k so I can start taking on some design projects without worrying about benefit reductions. Thank you all for sharing your knowledge and real-world experiences - this is exactly the kind of practical guidance that's impossible to find elsewhere!

This has been an absolutely incredible thread to read as someone new to both this community and the whole early retirement/Social Security benefits world! I'm 62 and have been on the fence about claiming my SS benefits because I have a small consulting business that I wasn't sure how to handle with the earnings limit. The solo 401k strategy is completely new to me - I had no idea that retirement plan contributions could reduce your countable income for the earnings test. Reading through all the real-world experiences shared here, especially from people like Anastasia and others who have successfully implemented this approach, has been more helpful than months of trying to research this on my own. What really stands out to me is how this strategy transforms what seemed like an either/or decision (claim benefits OR keep working) into a manageable planning opportunity. The fact that you can continue growing your business while maximizing both current income and retirement savings is brilliant. I'm planning to set up a solo 401k with Schwab next week and finally claim my benefits. The detailed advice about timing, record-keeping, and finding the right professionals has given me a clear roadmap forward. Thank you all for creating such a supportive community for those of us navigating these complex decisions - this is exactly the kind of practical guidance that makes all the difference!