NerdWallet's Smart Money Podcast - Is College Worth It in 2026? Plus, How to Split Solo 401(k) Contributions to Save More

Episode Date: May 7, 2026

Learn what 2026 grads could borrow for college and how solo 401(k) contributions can build retirement wealth. How much could it cost to go to college in 2026, and is a four-year degree still a smart financial move? Hosts Sean Pyles, CFP®, and Elizabeth Ayoola dig into a new NerdWallet analysis of federal data with senior news writer Anna Helhoski and NerdWallet data writer Erin El Issa. They explore why most Americans say the federal student loan system feels broken even as they still see college as worthwhile, the rising appeal of the trades, how AI is shifting the way teens think about majors and careers, and what new borrowers could expect from the federal repayment options rolling out July 1. Then, Ryan Sterling, wealth advisor at NerdWallet Wealth Partners, joins Sean and Elizabeth to help answer a listener's question about how to split solo 401(k) contributions between the employer and employee sides of the account to maximize retirement savings. They discuss how solo 401(k)s differ from standard workplace plans, how to think about the contribution split if you also have a W-2 job, when traditional versus Roth contributions could make more sense, how solo 401(k)s stack up against SEP IRAs, the investment flexibility you could gain through a brokerage-based plan, and the common mistakes business owners make when trying to maximize retirement savings. NerdWallet Wealth Partners, LLC is an affiliate of NerdWallet Inc. NerdWallet Wealth Partners is a fiduciary online financial advisor, offering low-cost, comprehensive financial advice and investment management. Learn more at nerdwalletwealthpartners.com/smart  Read NerdWallet's 2026 high school grad analysis here: https://www.nerdwallet.com/student-loans/studies/high-school-grad-analysis  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Elizabeth, we have to talk about the newsletter. What newsletter are you talking about, Sean? You mean the new, free, smart money email newsletter? Yes, and I have to say it is so good. It really is. It has clips, episode roundups, and behind the scenes takes from me, you, and our producer, the stuff that makes you feel like you're really part of the show. And listeners, for the record, you actually are part of the show.

I'm going to be sharing personal stuff. You know, I love sharing my business, and I'm going to be sharing parenting tips from an eight-year-old. a single mom perspective. And I am loading up the newsletter with my favorite gardening tips and lots of cute photos from my garden, including my pets, just napping among my flower beds. It's kind of adorable. And the best part is that this newsletter is totally free. So head to nerdwollet.com slash podcast to sign up. For the record, that's nerdwollet.com slash podcast. Come hang out with us. An increasing number of Americans think college is not as important as it used to be to earn a decent living. So it's only right that we ask the question, is college still a good investment?

Today, we'll be using NerdWallet's 2026 high school grad analysis to help answer that question. Also, we'll be answering a listener's question about solo 401Ks. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. Later this episode, we're going to be discussing Solo 401K options for all the entrepreneurs. out there. But first, our weekly money news round up where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague, Anna Hal Hoski, is back to talk about the findings of the grad study. Welcome back, Anna. Thanks, Elizabeth and Sean. So yeah, a new

neural analysis of federal data shows that nearly half of 2026 high school grads will go to a four-year college. And more than a third of those, going to a public four-year university, will take on student loan debt. But while most people think college is worth it, they also think that the system is broken. So here to talk over the findings of that new study is Aaron L. ESA, data writer here at NerdWallet. Aaron, welcome back to Smart Money. Thanks for having me. So the results of the new survey, which was conducted by the Harris Poll in March, found that nearly 70% say college isn't as important as it used to be to earn a good living. Yet 65% still call a four-year degree a smart financial mood. How do you make sense of that tension? So, I mean,

people hold competing beliefs all the time, right? So particularly when one of those beliefs is widely seen as common knowledge. A four-year degree being a smart financial move is generally true based on the average earnings of someone with a degree versus someone without that post-secondary education. But with so many college grads facing student loan debt, the potential impact of AI on white color career prospects, and a tough entry-level job market, many may see that while college can be a good investment. It's not the only path to success. Trade school programs can often be completed faster, cost a lot less money, and point to a clearer career path than a bachelor's degree. So over three quarters of Americans in your survey say that trade jobs are more secure than office

jobs. What if that tell us about how people are thinking about the value of a degree right now? So learn a trade seems to be the new learn to code, right? It's that advice everyone's getting. So generative AI and its current iteration is just a handful of of years old. It feels like it's been here forever, but it really hasn't. And it's already being cited as a contributor to layoffs. So think four or five, six years down the road when 2026 high school grads have become college grads. We can't know what impact it'll have on the broader job market and entry level options. What we do know right now is AI is more capable of automating office and tech-based work than hands-on physical labor, like the trades. So I think this sentiment about trades

being safer than office jobs is less a reflection on the intrinsic value of a college degree, right? And more so the level of impact we think AI will have on different industries in the near future. So as you say, with AI reshaping so many fields, it's harder for students to feel confident that a course of study is going to pay off after graduation. So how else is AI coming into play for students when it comes to considering college as well as specifically their career choices? Yeah. So I am a mom of Littles and I really do not envy teens or their parents trying to navigate this right now. Hopefully it all gets figured out by the time I'm there. AI, of course, it doesn't preclude young people from building strong careers.

But in a rapidly changing environment, education and career decisions just, they're not as straightforward as they were when I graduated. That was in the wake of the 2008 recession. So like, you know, we all have our own battles. But this is particularly tricky. So in the study, I reference an external survey of high school students conducted by EAB. And the survey found that around two and five. high school students say AI will influence the career or job they pursue. And 39% are considering

a college alternative because of advances in AI technology. Let's turn to actually paying for college. 78% of Americans agree that the federal student loan system is broken. If so many people think that it's broken, why are students still using it? Well, I mean, assuming you can't pay for college through other means, right? Scholarships, grants, part-time work, parental help. Most will have to take on loans or just for go college. So your options for traditional loans are federal or private. Whether or not you agree that the federal student loan system is broken, it's still more appealing than private. Private loans originate with a banker lending institution rather than the federal government. They tend to have higher interest rates, less flexible payment plans. And they also won't be eligible for student loan

forgiveness like PSLF. Also, like federal student loans, they typically can't be discharged in bankruptcy. Some students will end up taking on both federal and private loans, but we do recommend you max out federal loans before turning to private. Yeah, I would also have people consider the fact that we've seen federal student loan policy shift so much in the last few years. You're probably going to be paying off your loans for a long time. So having a federal student loan seems just in general the better way to go. Now, the analysis of National Center for Education Statistics data found that a typical high school graduate entering a four-year public college in fall 2026. could take on $43,500 in student loans. Walk us through that number.

What assumptions are baked in? So we have that NCES data through the school year 2022-2020, and that is data for the average student loan awards. We looked at the prior five years of data to figure out the average annual growth rate so we could project loans into the future. So this is a projection.

It's an estimate grounded in what we've seen in recent years until I get that crystal ball that I have been asking for. For the purposes of this analysis, we assume a five-year graduation timeline. So the 43,500 is the sum of five years of estimated student loans. All right.

So five years to graduate, not four. Why is that? So there's 2025 research from the NCES that finds about 57% of college students graduate within five years, whereas only 44% graduate within four years. So we are taking that longer estimate since it's more common. That said, one way to minimize student loans is to adhere to that standard four-year graduation timeline. Sure. Now, this is easier if you know exactly what you want to do

and you don't deviate major, which isn't going to be the case for everyone, but it is a way to save money, so. What are the most effective strategies that students and parents can use right now to minimize how much that they're actually needing to borrow? The best thing you can do to reduce the cost of college is to pick an affordable school, right? Starting off at a community college or go, going to a public state university in your state of residence unless you get hefty scholarships from another school. But for graduating seniors, right, it's likely they already know where they're going and they just need to figure out how to minimize from here.

My somewhat obvious advice that I did not take myself is to take out only what you need. So when I was in college, I was given some not great advice. Just take the max offer. Like you'll be making so much money after graduation. It'll be so easy to pay off. you're just going to be rolling in it. I did finally stop doing that my senior year, and I was able to pay off my student loans

within four years of graduation. Oh, wow. That said, looking back, I would have taken out only what I needed for school and basic living expenses. And also keep applying for scholarships. So incoming students have the biggest pool of scholarships available to them,

but there are plenty of scholarship options you may be eligible for throughout your college career. That's something your career services center at school can help you with. for my fellow parents. I mean, like, do your best, right, to guide your kid to make financially informed decisions about school, but they might not listen.

And that's okay. You can tell me anything when I was 18. You know, they're adults now. You can do your best to impart this hard-won money wisdom, but ultimately they might need to make their own mistakes for this to sink in. Be there for emotional, if not financial support, if they end up regretting some money moves along the way. and really try not to say I told you so.

That might be tough, but try. Very wise advice, Erin. So there are some major changes to student loan repayments starting July 1st for new borrowers. Can you explain a little bit about what's changing and who it's going to affect? For federal student loans taken out on July 1st or later, there will be just two repayment plans. There's the tiered standard plan and the repayment assistance plan, which is also known as rep. The existing standard plan we have now has a 10-year repayment term, no matter. how much you took out in loans. And the new tiered standard repayment plan for loans taken out

in July or later will have a repayment term between 10 and 25 years based on the amount you took out. So as an example, if you take out $50,000 in student loans, your standard repayment would be 20 years. What this means is that those with higher student loan balances will have lower payments under the new standard plan than they would under the old plan. However, they'll also pay a lot more interest over time. Now that new repayment option, the repayment assistance plan, basis payments on income and family size, and then any remaining balance is forgiven after 30 years. Who is RAP best suited for? RAP may make the most sense for those with low incomes and high student loan balances. Minimum payments for most will be between 1 and 10% of AGI or adjusted gross income, and then

payments are then reduced by $50 a month for each dependent you have. The lowest possible monthly payment you can have under RAP is $10. And RAP has an interest subsidy. So regardless of your payment, your principal balance will go down by at least $50 a month. And then, yes, after 30 years of payments, any remaining balance will be forgiven. All right. Again, those changes start July 1st. Erin, thank you so much for joining us.

Thank you. And thank you, Anna, for educating us on the new analysis. And what is my verdict? Is college worth it? For me personally, yes. What about for you, Sean? 100%. I learned so much. I made some amazing friendships and it got me the job I have today. So thank you college, although I still am paying off my student loans, which I resent. Boo. Forgive Sean's student loans. We need to start a campaign for that. Maybe I should start to go fund me or something. I'll send you the link Elizabeth.

No, why me first? Oh my God. kidding. I mean, you're the one trying to free me from this debt. So we'll talk after this recording. Okay. Well, up next we answer Alyssa's question about solo 401K options. Before we get into all of that, though, a reminder listener to send us your money questions. Maybe you are wondering whether you should actually take out student loans ahead of a career change that you're looking into or not at all. Whatever your money question, hit us up on the nerd hotline. You can send this an email at podcast at nerdballot.com. Leave us a voicemail on the nerd hotline at 901-7306373. That's 901-730 nerd.

You can also drop us a comment on Spotify or YouTube. In a moment, this episode's money question. We want you to stay with us. We are back in answering your money questions to help you make smarter financial decisions. This episode's question comes from a listener via text, and it's for those who are entrepreneurs or aspiring ones. It's about solo 401ks. Here's the question. Hello, nerds.

I just opened a self 401K, and I was wondering how I should contribute to the employer 401K, an employee contribution. Should I contribute an equal amount as an employee? an employer to maximize the benefits? If not, what ratio would you recommend? To help us answer this listener's question on this episode of Smart Money, we're joined by Ryan Sterling, Wealth Advisor at NerdWallet Wealth Partners, a wholly owned subsidiary of NerdWallet. Ryan, welcome back to Smart Money. Thanks for having me. It's good to be here. Let's start with the basics, Ryan. Not everybody is familiar with what a solo 401K is. It's also known as a self-employed or individual 401K. So run us through what it is and how it works.

Solo 401 plan or individual 401K is a retirement plan for solopreneurs. So a big issue that a lot of solopreneurs have is, hey, you know, my friends that work at bigger companies, they have a 401k through their company, they get all these retirement benefits, what do you have for us who are self-employed? And, you know, if you're going to kind of go the full 401k route, there's a lot of regulatory concerns. There's, you know, you've got a partner with a big 401k provider. So the solution is to offer solopreneurs a solo 401 plan. And as the name suggests, it's a 401k plan that just has one participant, you as a solopreneur.

And not only that, but there are actually a lot of tax advantages that you get as a solopreneur that people who are W2 employees at big companies actually don't get. Can you outline some of those? You get to have two different contributions. So the first one is, just like people at any big company, you get to put 24,500 as an employee contribution into the plan. Here's where it gets better, is that as a solopreneur, once you finish doing the 24,500, you can then do what's called an employer contribution, where you can take some of the profits as

the employer and contribute that to the plan. So the maximum that you can do is 72,000. So again, it's a very large amount. Now, you have to have enough income to be able to support that. But to the extent that you do, you can put away 72,000 on a pre-tax basis versus, again, someone who's a W2 employee that might be constrained to 24,500. And can you contribute even more if you're over 50 in going this route? Yes, if you're over 50, there's something called a catch-up contribution. So instead of the 24,500, you can do 32,500.

So instead of the 72,000, you can do 80,000. That's pretty nice. But again, like you said, you have to have that income from your company to be able to hit that amount. That's exactly right. So that's where it's important to work with the CPA. There are a lot of nuances involved. But I think the general takeaway should be as a solopreneur, you get the 24,500. But you should have in your mind that you can do more as the employer.

And maybe as your business grows too, you can contribute more. But Ryan, I also want to just quickly clarify because you keep throwing the term solopreneur out there. Does this include gig workers? Do you have to be an incorporated business? Who is eligible for these solo 401ks? If you're a gig worker, 1099 income, you qualify. If you are an S-Corp, you also qualify. So you don't need to go the full LLC converting to S-Corp in order to do it.

You can basically say, hey, like, I'm starting a business, and I'm working part-to- time and I'm generating some self-employment income and you qualify for a solo 401k. Now, you do have to be careful if you are working at a company that has a 401k plan and you want to do the solo 401K, you have to be mindful of the employee portion. So that's the 24,500. So between both your W-2 and your self-employment income, you can do 24,500. So for example, if you do you do, 20,000 in your 401k, you can do 4,500 as the employee portion in the solo 401K. But you can still do the employer contribution. Are there any other differences between solo 401Ks and workplace 401Ks beyond being able to contribute as the employer in a solo 401k? Yeah, I mean, I think that's the

big nuance. And I think that's the big advantage that as the solopreneur, you can do both the employee and the employer. So that's where, you know, once again, you just have to be mindful the fact that if you're working at a W2 job and you max out your 401k at your W2, then you're really constrained to just the employee your portion that you can do for your solo 401K. Okay. And this might be helpful for our listener because they're wondering about whether to contribute a certain amount as the employee and a certain amount as the employer.

But from what you've laid out so far, Ryan, it seems like you have to contribute as the employee first up to that maximum and then you go as the employer contributing. Is that correct? Or can you choose to contribute as the employer from the beginning? beginning. Yeah, it doesn't really matter all that much. I mean, it's still money that you're, you're putting away, and whether you fill it up as the employee first or the employer, doesn't really matter all that much. But if this listener has a W-2 job, that's then where you just want to be mindful of how you split and you actually might want to put more as the employer in that

case, just to be careful. But, you know, if you're a solopreneur, you don't have a W-2 job and you want to put away, you know, 24,500, what I would personally recommend, is filling up the employee portion first. Because you get that 24,500, you don't necessarily have to worry about any sort of calculation that goes into how much you can put into the employer. Because that's another important nuance to keep in mind is the employer portion, the amount that you can put in, you don't automatically get to put in an additional 47,500 to get to the 72,000. There's a calculation in place. So it's either contingent on if you're NesCorp, the W-2 income that you pay yourself, you can do 25%. So for example, if you do the 24,500 and then you pay yourself

a $100,000 salary, you can do another $25,000. You're limited to that. Right. And then for someone who is not an S-Corp, there's someone where maybe they have an LLC, but they haven't converted to an S-Corp, they're at 20% of whatever they bring in. So if you bring in 100,000, then 20,000 is what you can do for the employer portion. Got it. So much simpler to contribute as the employee. It's way simpler because you get the 24,500 without really having to think about it, where again, there is a calculation for the employer, which means you do want to work with the CPA because a CPA can help you kind of figure out what is that sweet spot of what you should be paying yourself to be able to maximize a solo 401K contribution versus some other considerations that could be tax advantageous or not in terms of increasing your income that you pay yourself. So there's a lot that goes into it. I would say that we work with a number of really good CPA. who basically tell our clients, this is what you should be paying yourself through payroll or salary in order to take the best advantage of Solo of War I.K. While at the same time, maximizing some other tax benefits. Ryan, as you outlined, the cap on what you can contribute as an employer and an employee is different.

While working with a CPA, I think it's a great way to approach it. Not everyone is going to do that. So how should they think through then how to split these contributions? It goes back to what I was saying before. It's like just take the 24,500 as the employee. and look for a lot of people, that's a lot. It's hard to get up there, especially when you're first sorting out. So I think, like, number one is like that should be the first target, is maxing out the employee at the 24,500.

I think then when you start to say, okay, hey, I feel comfortable, you know, putting that in, I want to put more in. I think that's when the rough math is basically 20% of your business profits, unless you're an S-Corp. But if you're an S-Corp, you probably have a CPA, so they can help you with that. But if you're if you're not an S-Corp yet, I would just kind of have that 20% in mind. So if you're making profit $50,000, you know, an extra $10,000 could go into it. Now, I also want to keep in mind that while there are some tax advantages to being able to do the employer portion, you also have to live your life too. So the last thing you want to do is to put, you know, the 72,000 and feel really good that, you know, you got the maximum tax benefits. But then you're not able to grow your business.

because your capital constraints. So I'm a huge fan of these retirement plans. Again, for solepreneurs who are making 200, 300, 400, 500,000 or more, great, all day long, max us out. But if you're getting started and you're trying to grow your solo business, your solo practice, yes, you want to be able to put away as much as possible, but you also have to keep in mind that you might want to grow your business and or have some free cash flow to live your life.

So I would also put. those constraints in there as well. So in that case, say someone is just a few years into starting their business and they do want to save retirement, maybe they're considering a solo 401k or an IRA. Do you think either option is fine? I mean, of course, a solo 401k has a higher contribution limit, but do you think one might be better than another at maybe an earlier stage in someone's business? So a close cousin to the solo 401k is what's called a SEP IRA. And that was the popular kind of solopreneur retirement plan before solo. 401Ks. I'd still say a step is a good option. It is constrained to a percentage of your profits. So you don't

automatically get that 24,500 in the SEP. So there's a really good chance with a SEP that you can't put away as much. Now, historically speaking, the reason people did steps instead of Solo 401Ks is steps were just a lot easier to set up, where there was a little bit more admin with Sola 401K. A lot of the big brokerage firms have made it very easy to open solo 401Ks now. So what I've seen over the last couple of years, it used to be four, five, six, maybe 10 years ago, SEPs were the popular option. Now I would say that I would say 70, 80 percent of time we're seeing solo 401Ks. Oh, wow.

So I'm old school. Am I left behind? I use a SEP IRA and it works perfectly fine for me. I know, Sean, that you recently started a business, of course. And Ryan, do you have a business? Do you guys use retirement accounts? And if so, which ones do you use? Yeah, it's a great question.

So when I first started my business, I did zero retirement accounts. Why? Because I wanted to grow the business. So, you know, I wanted to take advantage of some of these options at the same time, it goes back to like I didn't want to be capital constrained. And by the time we got to the point where I started maxed down retirement, we actually had employees at that point. So I was no longer a solopreneur. So that's where we had a more traditional 401k plan. I will say if you have a SEP and the SEP is working for you, by all means, SEPs are. are great. There's there's nothing wrong with a step. It's a very, very, very close relative to the solo 401K. I would say where I've seen people go from a SEP to a solo 401K, it really is that point where it's like, gosh, I'm so flush with cash right now. And I just, I really want to be able to put more into it. When you're self-employed, you can structure your pay to minimize the amount of payroll taxes you have to pay. That's through an S-Corp. But there's a puzzle pieces at play

and there's kind of this mosaic you have to put together of how little do I want to pay myself to avoid the payroll taxes. But the less you pay yourself, the less you can put into yourself. So then it becomes a, well, wait a second. If I do a solo 401K, I get the 24,500 automatically. But what you might be able to do is pay yourself intentionally a lower salary to pay less in payroll taxes. But with the solo 401k, you can still get that 24,500, whereas a SEP you're going to be able to put in far less because of the percentage of your salary that you can contribute. Yeah. And Elizabeth, a benefit of you having the SEP is that it doesn't have the same contribution limit, doesn't share a contribution limit with your workplace 401K. Yes, exactly. Or if you had the

solo 401K, you would have that combined contribution limit on the employees side. That's a great point. Absolutely. I want to talk about investment options in Solo 401k. A benefit of workplace 401Ks is that they're often loaded up with different target date funds that are pretty easy to just get into. Is that accessible in a solo 401k or how might people decide what investment options might be best for them if they don't have access to a target date fund? Yeah, and a solo 401k, I mean, you're going to open it up at a brokerage firm like a Charles Schwab, for example. And then, I mean, you have a wide array of investment options, which is a good thing and a bad thing. So why is it a good thing? It's a good thing because you have more investment options.

So you're not just constrained to the investments in the 401 plan. Why is it potentially a bad thing? Well, it's a bad thing because there are a ton of options. So there are more ways to make mistakes. The clients we work with who have solo 401Ks, where we're managing the investments for them. So that kind of alleviates that concern. For someone who's going at the solo,

you know, you definitely have to make sure that you're researching investments and that you have an allocation that is aligned with your long-term goals and objectives, and you're probably going to want to make it pretty similar to what the target date funds are in terms of the allocations. But again, depending on who you are and how you see it, it's either an advantage or a disadvantage. I know we touched on this earlier. We talked a little bit about tax benefits, but I want us to go a little deeper into that because that's one of my favorite aspect of retirement accounts. Can you talk us through the tax benefits of a solo 401K, Ryan? The big one is that you're able to defer taxes on it. So if you make a pre-tax

contribution and let's say you do the full 72,000, that's 72,000 that you're not being taxed on this year. So let's say you're a solvenor and you have a blowout year and you're in the top marginal tax brackets. And let's say you live in a place like New York or California. Well, by putting $72,000 in, you basically get a $30,000 plus tax benefits. So you pay $30,000 less in taxes than you would otherwise. In addition, that money grows tax deferred. So when it's invested, any sort of capital gains or dividends in the account will not be taxed. Now, in the future, when you take the money out, that is going to be taxable. So you do pay taxes at some point in time, but the benefit is you get to delay or defer the taxes. Now, there's also the option to do a Roth Solo 401K. Now, with the

Roth solo 401k, you don't get a tax deduction up front. So that's 72,000. That's still going to be income that you're going to pay taxes on. But the money that goes into a Roth grows tax-free. So any interest or capital gains grows tax-free. And then when you take it out in the future, you're not tax on it. So what's the right choice? Do you do the traditional solo 401K or do you do the Roth? It all depends on the income bracket that you're in right now. So I would say that if you are someone where you're having that amazing year and you're in the top marginal bracket and you live in a high tax date, taking the pre-tax and being able to defer those taxes, that's really powerful because there's a good chance in the future that you're not going to be in the top marginal

tax rates. If you're in a lower tax bracket, but your business is growing pretty quickly, there's a chance you're going to be in higher tax brackets later on. So you might want to take advantage of the Roth because that tax deduction isn't necessarily as important. That money can grow, tax-free, and then when you take it out in the future, it's not taxable. So there are a lot of tax benefits. It's very similar to a 401k, but you just have to make the choice, do I want to get the tax deduction now and have tax-affirred growth, or do I not care about the tax deduction now, but I'm going to get a tax-free growth, and when I take it out in the future, I'm not going to be taxed. The decision that you just outlined around whether to go Roth or traditional with the solo

401K is a lot how people consider this when it comes to their own workplace 401Ks or working with even a traditional or Roth IRA. Are there any other unique tax considerations that people should consider with a solo 401k when they are deciding traditional or Roth, or is it pretty much the same across the board with these different accounts? Yeah, I mean, I think, I think, again, it just goes down to, are you in a higher tax bracket now or are you going to be in a higher tax bracket in the future? Now, we don't know. There are no future facts, so we have zero clue what tax brackets are going to be in the future. I will say, though, if you are a top marginal earner right now, and you're in a high tax date,

I feel like it's probably a pretty safe bet that you're in the highest tax bracket that you're ever going to be in. So you get the benefit from doing the traditional pre-tax today and paying taxes in the future. Well, Ryan, you work with people every single day with their finances. I'm sure you work with people who have a solo 401K.

Are there any common mistakes that you see people making when it comes to these accounts? The big mistake I see people making is that they get over-enthusiastic about it. and they put too much into it. Look, I'm a fan of taking advantage of all of these amazing tools and tax breaks. However, it's like I was saying before, if you're putting $72,000 into this and you can't live your life or you don't have as much money to invest in your business or you're feeling cash constrained, that's a problem. So it's one of those where it's like, yes, we want to

be able to take advantage. But let's also put this in the context of other spots in your financial plan and other financial goals that you have. I think the other big one, too, is going back to that traditional versus Roth. I'm a big fan of Roths. However, one thing I do see is that the Roth is so ingrained in people's heads. And to be honest, like a lot of accountants as well, where it's you're trained to think of the Roth, like, I want to pay less when I take it out in the future. And especially when I see people who are getting up there in tax brackets, they still have this mindset of the Roth. And what we have to oftentimes remind them of is that, hey, like, you're in a pretty high tax bracket right now. You get a massive deduction for putting in the traditional portion right now. And at some

point in the future, you're likely going to be in a lower tax bracket and you can do Roth conversions then. There's one other thing, too, that you have to be mindful of is that when Solo 401ks get beyond 250,000, you have to file a form. It's called a 5500 form. It's not a hard form to complete. However, if you don't do it, the penalties can be punitive. So there's one thing to be mindful of when you have a solo 401k is you do kind of have to be mindful of the fact that as this grows, there are going to be some reporting requirements that you're going to have to think about and adhere to. And again, they're not hard, but the penalties for not following them are very. steep. I want to go back to your point, Ryan, about figuring out how much you can contribute to these

accounts while still growing your business and living your life. How do people determine what amount might be right for them? It's a good question, and it's my favorite answer. It depends. It depends. I mean, it's one of those things where a married couple and they have goals to buy a home, and one of the spouses has a traditional W-2 job, another spouse has a solo 401K, and they want to buy a house in the next couple of years, but they put 72,000 into the solo 401k, and then that delays their ability to make a down payment. Things like that. There's more research coming out, called it the middle class trap. And that is, there's a whole bunch of people out there that are millionaires, and they're millionaires because they've accumulated so much in their retirement accounts

with a retirement account rich, but they have zero liquidity everywhere else. So what that means is if you want to take a mini sabbatical, if you want to maybe retire early, if you have an unexpected disruption where maybe you do lose your job and you're going to be out of work for a year, that the money and retirement account, yeah, that's great, but doesn't really help you all that much. So we're huge out of the kids of maxing out all those retirement plans. Don't get me wrong. However, you know, when we underwrite financial plans for our clients, you know, we have to look at, you know, what are some of these goals? And, you know, sometimes there are things that are right to do, but they're in conflict or provide tension to some of these other life goals. So that's where it's like, what's the answer?

The answer is depends. And it's very specific to the clients with the individual. And that's why you work with a financial advisor who can help you do this. That's right. Well, I can't let you go, Ryan, without talking about one of my favorite topics. And that is saving for retirement. And I know not everyone is able to do that. But I find the data interesting that I come across about how on,

entrepreneurs are saving for retirement or the lack thereof. According to a 2025 wealth rabbit small business retirement report that I came across, the most common amount entrepreneurs between the ages of 45 and 55 has saved for retirement was $50,000. And it also found that one in five business owners don't have any savings at all. So can you quickly talk about the importance of saving for retirement as an entrepreneur? And I sometimes hear people are relying on hopefully selling their business during retirement, and that's their retirement plan, which sounds pretty scary to me. I agree. And as someone who's a small business owner myself, there's a lot of hopium involved. And I will say, you don't start a business if you're not optimistic, right? You have to have a certain amount of

optimism to be able to take the plunge and to go into business on your own. So you're kind of wired that way to beacon with. I know I certainly was. And I mentioned that in the first couple of years, I actually didn't contribute to retirement plan because I was getting my business up and running and that was more important to me. That said, the second that I could, I did. And I really focused on that. I want all the solopreneurs listening to this podcast

to have an enormous amount of optimism. But it's also important to hedge. And I think putting money into retirement account is a great hedge just in case things don't go the way that you think they're going to go. I think another important point, I was talking to someone recently about this. You know, there's a saying that

We overestimate what we can do in a year and underestimate what we can do in a decade. That is so true with building wealth. So when we look at financial plans for our clients and when we look at someone who's in their late 30s or so and trying to get to financial independence in their mid-50s to early 60s, it's actually not that heroic in terms of what you have to do in order to reach those goals. But you have to be consistent. You have to make sure that you're investing. but I would say for any solopreneur out there,

it's you have to think about planning for retirement and you have to diversify outside of your business. And once again, I just want to repeat myself, it's so important to land this point is that it doesn't require anything heroic today. Even if you are able to put 10, 15, 20, get to the 24,500, that does move the needle significantly over time.

All right, Ryan, I think that's a great place to leave it. Thank you so much for coming on and talking with us about all this today. Yeah, thank you so much. And once again, Ryan is a wealth advisor with NerdWallet Wealth Partners. If you yourself are considering working with a financial planner like Ryan, then visit NerdWalletwealth Partners.com. Of course, we're going to include a link to that in today's episode description.

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