Solo 401(k) vs SEP IRA Calculator
The employee-deferral gap that usually decides which plan wins
Solo 401(k) vs SEP IRA Calculator
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yrs
Max Solo 401(k) contribution
0
employee deferral + employer profit share
Max SEP IRA contribution
0
employer contribution only
Extra room with Solo 401(k)
0
from the employee-deferral component SEP lacks
The employee-deferral gap
A Solo 401(k) lets you contribute as BOTH employee (up to the standard elective-deferral limit, plus catch-up if 50+) AND employer (roughly 20% of net self-employment income) — SEP IRA only allows the employer-side contribution, which is why Solo 401(k) usually wins at lower and mid incomes.
They converge at high income
Both plans share the same overall annual addition cap — at high enough self-employment income, the employer-contribution-only SEP can reach the same ceiling as a Solo 401(k), narrowing or closing the gap shown above.
SEP IRA is simpler to administer
SEP IRA has minimal paperwork and no annual filing requirement even at higher balances; a Solo 401(k) requires a Form 5500-EZ filing once plan assets exceed $250,000 — a real tradeoff against the extra contribution room.
Solo 401(k) modeled as employee deferral (a flat estimate of the standard limit, plus a catch-up amount if age 50+) plus employer profit-sharing contribution (approximately 20% of net self-employment income after the self-employment tax deduction, a standard simplification for sole proprietors), capped at the overall annual addition limit. SEP IRA modeled as employer contribution only, same approximately-20%-of-net-SE-income formula, capped at the same overall limit. Actual limits are set annually by the IRS and adjust for inflation — verify current-year figures before contributing. Not tax advice.