Real estate investors, like anyone else, need peace of mind and financial security by the time they retire. Luckily, there are a lot of great retirement plan options available today. The most well known types include an individual retirement account (IRA) or a 401(k) plan as offered by an employer. These plans allow account owners to invest in mutual funds, bonds and stocks. However, did you know both types of accounts come with another option? A self-directed IRA (SDIRA) or self-directed 401(k) plan offers many more investment options than regular IRA or 401(k) accounts do. This includes real estate, life insurance, private placements, precious metals, renewable energy sources and much more. With such great avenues of investment available to you, it makes sense to want to be able to maximize your contributions. After all, the more money you put into your retirement account, the more you have available to invest and increase your growth potential. This is where the self-directed, or solo, 401(k) really stands out. In fact, unlike your other retirement accounts, a solo 401(k) has an annual contribution limit that can be five to ten times higher. How is this possible? Let us take a look at solo 401(k) contribution limits and types of contributions allowed.Contribution LimitsThe Internal Revenue Service (IRS) regulates the contribution limits for retirement or investment accounts. For a SDIRA, and most other retirement accounts for that matter, the IRS only allows you to contribute up to $5,500 each year. If you start making contributions to your 401(k) account at the age of 30, based on an average return on your investments, this means you will likely only receive $1,000 a month once you retire. Based on your current cost of life expenses and standard of living, will a $1,000 monthly distribution be enough based on retirement at the age of 65? Most likely, it will not. In contrast, however, a solo 401(k) has a much higher maximum contribution limit. In fact, as of 2017, the IRS allows you a maximum annual contribution of up to $54,000 for anyone under the age of 50. If you are older than 50, this limit is even higher. Types of ContributionsThe contribution limits alone are among the solo 401(k) benefits. However, a solo 401(k) also offers flexibility when it comes to how those contributions are made. Like an IRA or SDIRA, you can make traditional (pre-tax) or Roth (post-tax) contributions. A solo 401(k) also permits account owners to make a combination of employee deferral contributions and profit-sharing contributions.Employee Deferral ContributionsAs of 2017, the IRS has set the maximum employee deferral contribution limit to $18,000 for a solo 401(k). As the name implies, this type of contribution is one made as an employee. This is the most commonly understood type of contribution; it is the same type of contribution you can make to an IRA, SDIRA, 401(k) or other retirement account. The limit is just higher for a solo 401(k).Profit-Sharing ContributionsProfit-sharing contributions, on the other hand, are the employer or business owner side of the house. With a solo 401(k), the IRS allows you to contribute up to 25% of your annual business income up to $54,000.It is important to note that your maximum contribution limit is a combination of the employee deferral contributions and your profit-sharing ones. Therefore, if you make a $18,000 employee deferral contribution, you can only supplement it with a $36,000 profit-sharing contribution. However, you can mix and match these contributions to reach that $54,000. If you want to contribute less through your employee deferral investments, you can increase your profit-sharing contributions to reach that $54,000 limit.Important Things to NoteThere are a few things you should note when it comes to your solo 401(k) contributions, however.Incorporation StatusYour incorporation status affects the percentage of profit-sharing contributions you can make. If your company is considered a non-pass through entity, such as an S- or C-Corporation, the IRS allows you to contribute 25% of your net W-2 income. However, if you have a pass through entity, such as a sole proprietorship or limited liability company (LLC), the IRS formula is much more complicated. (If this is you, our professionals can help you understand how different pass through entities affect your profit-sharing contributions.)Playing Catch-UpThe IRS allows you to make catch-up contributions if you are over the age of 50. Catch-up contributions increase your employee deferral contributions by $6,000. This means you can contribute $24,000 to your solo 401(k) instead of just $18,000. When combined with your profit-sharing contribution, this gives you a new maximum limit of $60,000 instead of $54,000!Multiple 401(k) PlansIf you have both a 401(k) account through your employer, as well as a solo 401(k) account through your side hustle, your employee deferral contributions of both can not go beyond the $18,000 limit. However, the employer contribution to the 401(k) and your profit-sharing contribution to the solo 401(k) do not affect each other. For example, if you make the maximum $18,000 contribution into your 401(k) account and your employer matches this, you have a total $36,000 contributions. However, if your solo 401(k) side business nets you a $200,000 income, you can still contribute up to 25%, or $50,000, of this. Total, this gives you $86,000 in contributions you can use for investments.Self-Employment ActivityContributions to your solo 401(k) can only be made in relation to your self-employment activities. You cannot take money from your day job and contribute it to your solo 401(k).