Retirement Plans for Business Owners: Solo 401(k) vs. SEP IRA

Why Retirement Plans Matter for Business Owners

As a business owner, you don’t get the luxury of an employer-sponsored 401(k). That means you are responsible for creating your own retirement plan — and choosing wisely can mean the difference between thousands in lost tax savings or accelerated wealth building. Two of the most popular options are the Solo 401(k) and the SEP IRA. Both reduce your taxable income today, both grow tax-deferred for tomorrow — but the details matter.

‍

Solo 401(k): The Powerhouse for Higher Contributions

The Solo 401(k) is designed for self-employed business owners (and their spouse if applicable) with no other full-time employees.

Key Features:

• Higher Contribution Limits – In 2025, you can contribute up to $69,000 if you’re under 50, or $76,500 if you’re over 50.
• Dual Contributions – You can contribute both as “employee” (salary deferrals up to $23,000) and “employer” (up to 25% of compensation).
• Roth Option – Many Solo 401(k)s allow Roth contributions, giving you tax-free growth potential.
• Loan Option – Some Solo 401(k)s allow you to borrow against your balance.

Best For: Business owners who want to maximize retirement savings and leverage both pre-tax and Roth strategies.

‍

SEP IRA: Simple and Flexible, But With Limits

The SEP IRA is also built for business owners, but it has fewer moving parts.

Key Features:

• Employer-Only Contributions – You can contribute up to 25% of your net earnings, capped at $69,000 for 2025.
• Simple Setup – Fewer administrative requirements compared to a Solo 401(k).
• No Roth Option – Contributions are always pre-tax.
• No Employee Deferrals – You can’t make contributions as an employee, only as the business owner.

Best For: Business owners who prefer simplicity, have fluctuating income, or want an easy-to-administer retirement plan.

‍

The Bottom Line

If your goal is to maximize tax savings and retirement contributions, the Solo 401(k) is usually the winner. If you want simplicity with fewer admin requirements, the SEP IRA may be a good fit.

The best plan depends on your income level, business structure, and long-term financial goals.

‍

👉 Ready to see which retirement plan is right for you? Book a Free 15-Minute Consultation and I’ll show you how to cut taxes, boost savings, and build long-term wealth.

‍

‍