SEP IRA vs Solo 401(k) Calculator
Self-employed? Compare your maximum retirement contribution under a SEP IRA and Solo 401(k) side by side. The Solo 401(k) often allows significantly higher contributions at moderate incomes thanks to the employee deferral component — see exactly how much more you could save.
Schedule C net profit (gross income minus business expenses)
Age 50+ qualifies for catch-up contributions (Solo 401k only)
Your federal marginal tax bracket for estimating tax savings
Frequently asked questions
What is the difference between a SEP IRA and a Solo 401(k)?
Both are retirement plans for self-employed individuals. The key difference is that a Solo 401(k) allows employee elective deferrals ($23,500 in 2025) on top of employer profit-sharing contributions, while a SEP IRA only allows employer contributions. This means at incomes below roughly $350,000, a Solo 401(k) usually allows significantly higher total contributions.
Why is the self-employed contribution rate 20% instead of 25%?
For common-law employees, the employer contributes 25% of W-2 compensation. But for self-employed individuals, the contribution is deducted from income before calculating "earned income," creating a circular calculation. The effective rate works out to 25% ÷ 1.25 = 20% of net self-employment earnings (after deducting half of self-employment tax). This applies to both SEP IRA and Solo 401(k) employer contributions.
What are the 2025 SEP IRA contribution limits?
For 2025, the SEP IRA maximum contribution is the lesser of 25% of compensation or $70,000. For self-employed individuals, this effectively means 20% of net self-employment earnings (Schedule C profit minus half of self-employment tax), up to the $350,000 compensation cap. There are no catch-up contributions for SEP IRAs.
What are the 2025 Solo 401(k) contribution limits?
For 2025, the Solo 401(k) allows up to $23,500 in employee elective deferrals plus employer profit-sharing contributions of 20% of net self-employment earnings, with a combined annual additions limit of $70,000 (Section 415(c)). If you are age 50 or older, you can add $7,500 in catch-up contributions ($11,250 for ages 60-63 under SECURE 2.0), bringing the potential maximum to $77,500 or $81,250.
What is the SECURE 2.0 super catch-up contribution?
Starting in 2025, SECURE 2.0 Act introduced a higher catch-up contribution limit for participants aged 60-63. Instead of the standard $7,500 catch-up (for those 50+), individuals aged 60-63 can contribute up to $11,250 in catch-up contributions to a Solo 401(k). This "super catch-up" reverts to the standard amount at age 64.
Can I have both a SEP IRA and a Solo 401(k)?
Technically yes, but it's rarely beneficial. The total employer contributions across both plans cannot exceed the Section 415(c) annual additions limit ($70,000 for 2025). Most self-employed individuals choose one or the other. If you want higher contribution limits at moderate income, choose a Solo 401(k). If you want simplicity and have high income, a SEP IRA may suffice.
Does a Solo 401(k) offer a Roth option?
Yes. The employee deferral portion of a Solo 401(k) can be designated as Roth (after-tax) contributions. Under SECURE 2.0, employer profit-sharing contributions can also be designated as Roth. SEP IRAs also gained a Roth option under SECURE 2.0, but custodian availability remains limited.
When should I choose a SEP IRA over a Solo 401(k)?
A SEP IRA may be better if: your net SE income exceeds roughly $350,000 (where both plans hit the same cap), you value simplicity (no plan document, no annual filing), you have employees who must be covered, or you're under 50 and don't need catch-up contributions. The SEP IRA is easier to set up and maintain.