Solo 401(k) or SEP IRA: which lets you save more?
Both plans let a self-employed person or one-owner business put away far more than an IRA. The SEP is simpler; the solo 401(k) usually holds more, especially at moderate incomes, and it can unlock the mega-backdoor Roth. Enter how your business pays you to compare the ceilings side by side.
How you are paid
Where the money comes from
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How to think about the choice
Simple, employer money only
Contribute up to 25% of W-2 pay (about 20% of net profit for a sole proprietor). Easy to open, can be funded up to your filing deadline, but no employee deferral, no Roth, no loans.
Employee + employer
The same employer contribution as a SEP, plus your own deferral of up to $24,500 (more at 50+). Roth deferrals allowed. Must be set up by December 31 to defer for the year.
Adds the mega-backdoor
A plan document that allows voluntary after-tax contributions and in-plan Roth conversion lets you fill the whole $72,000 overall limit even at modest pay.
Setting up a plan for your business?
We help owners pick the plan, choose a provider, set a reasonable-compensation salary that supports the contribution, and fund it on schedule.