Posted by u/retirement_planning_finally
SEP IRA or Solo 401(k) for a small business owner?
Answered by Ask a Shop Owner ·
Just starting to save for retirement. Which is better?
u/askashopowner Owner-operator advisor
Top answer
For most solo owner-operators, Solo 401(k) wins. Higher contribution limits, ability to do Roth contributions, and you can borrow from it in an emergency (do not, but you can).
SEP is simpler to set up and works well if you have employees you do not want to contribute for (though then you cannot exclude them from the SEP either). For a pure solo, SEP is a leftover from an older era.
Open the Solo 401(k) at Fidelity or Schwab (free, no fees). Contributions are deductible up to $70k+ depending on your comp. That is a massive tax deferral most owners leave on the table.
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