Two popular retirement accounts for self-employed: Solo 401(k) and SEP IRA. Here’s how to choose.

Solo 401(k)

Pros

  • Higher contribution limits ($70,000 in 2025)
  • Employee + employer contributions
  • Roth option available
  • Can borrow from the account

Cons

  • More complex administration
  • May need Form 5500-EZ if over $250,000

SEP IRA

Pros

  • Simple to set up and maintain
  • Contribute up to 25% of net earnings
  • No annual filing required
  • Low administrative burden

Cons

  • Lower contribution limits ($69,000)
  • No Roth option
  • No loan provisions

Which Should You Choose?

Choose Solo 401(k) if:

  • You want maximum tax advantages
  • You want Roth option
  • You need loan access
  • You have higher income

Choose SEP IRA if:

  • You prefer simplicity
  • You have variable income
  • You don’t need Roth option

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