An example
For a 56-year-old solo litigation attorney with no staff, the 2026 figures work out like this:
- Cash balance plan, first year
- $274,000
- Solo 401(k) alongside
- $41,000
- Both plans
- $315,000
- A Solo 401(k) on its own
- $80,000
- Federal income tax saved
- $54,400
Federal income tax only, compared with making no retirement contributions. State tax saved depends on where you live: see savings by state. An illustration from the same calculation as the estimate, not a quote.
Attorneys are generally a specified service business for the 20% qualified business income deduction. Above the income threshold that deduction phases out, and a contribution that brings taxable income back down can restore part of it. How the deduction interacts with contributions
Which legal income can support a plan
- Solo practice fees, after expenses. Yes.
- Of counsel fees paid on a 1099 to you or your own entity as an independent contractor. Yes.
- Fees as an arbitrator, mediator, special master or expert witness, paid to you as a contractor. Yes.
- Salary as an associate, in-house counsel or government lawyer. No. It belongs to that employer's plans.
- A partner's share of firm income on a K-1. No. The firm is the employer, and a partner cannot set up a separate plan for partnership income.
Of counsel arrangements vary more than most. Some firms pay of counsel lawyers as independent contractors, some as employees and some as partners. The form you receive at year end, a 1099, W-2 or K-1, is a good first indication of which plan the income belongs to. See partners and multi-member LLCs if you are paid as a partner.
Leaving a firm to practice alone
The year a partner leaves a firm to go solo has two kinds of income, and they go to different plans.
- Your share of firm income for the months you were a partner belongs to the firm's plans. It cannot support a plan in your new practice.
- Deferrals you made through the firm's 401(k) that year count against the same per-person limit ($24,500 in 2026, plus catch-up from age 50) as deferrals to a Solo 401(k).
- The return of your capital account is not earned income.
- Fees earned in the new practice from the day it opens count in full.
A plan can be adopted for the first year up to the practice's tax return due date, including extensions, so the first partial year need not be lost. See cash balance plan deadlines.
Staff and shared offices
A one-person plan needs a practice with no employees other than you and a spouse. A paralegal, legal assistant or receptionist on your payroll is an employee, and would have to be covered once they meet the plan's age and service conditions. See hiring your first employee.
Lawyers who share space often share staff as well. If part of a shared assistant's pay runs through your own practice, that person may be your employee. If the assistant is employed by an entity you partly own, the controlled group and affiliated service group rules decide whether that entity's employees count as yours. See who can have a solo cash balance plan.
Contingency fees and lumpy years
A contingency practice can earn most of a decade's income in a few years. A cash balance plan is a poor fit for a single windfall, for three reasons:
- The benefit the plan can fund is limited by your average pay over your highest three consecutive years, so one exceptional year lifts it less than you might expect.
- The plan requires a minimum contribution every year, including the years between large fees.
- The IRS expects a plan to be permanent. Closing one after a year or two without a business reason can raise questions; see closing a cash balance plan.
It suits a contingency lawyer better when fees are steady enough across a few years to cover a minimum in the slower ones, with room to contribute more in the strong ones.
Law is a specified service for the QBI deduction, and the regulations include arbitrators and mediators as well as lawyers. Above $553,500 of taxable income for a married couple ($276,750 single), a law practice gets no deduction.