Not sure which plan fits your income and goals? The team at PlanPerfect Retirement can model your specific numbers and help you choose — and set up — the retirement plan that lets you save the most, with the least hassle.
We look forward to talking with with you.
Contact us today!
If you’re self-employed, a sole proprietor, or the only shareholder in your S-Corporation, choosing the right retirement plan can mean tens of thousands of dollars in additional tax-deferred savings every year. While a Simplified Employee Pension (SEP) IRA is easy to set up and maintain, a Solo 401(k) often allows significantly higher contributions once your income crosses a certain threshold.
The chart below compares maximum contributions under a SEP plan versus a Solo 401(k) across a range of self-employment income and S-Corporation W-2 wage levels, using the 2026 annual additions limit of $72,000. It also shows the added advantage available through 401(k) catch-up contributions for savers age 50 and older, and the new “super catch-up” for ages 60–63.
Figures below are based on Schedule C self-employment income (net of the self-employment tax deduction) and, separately, W-2 wages for an incorporated S-Corporation business owner.
| $50,000 | $75,000 | $150,000 | $200,000 | $275,000 | $360,278 | |
| Self-Employment Compensation | ||||||
|---|---|---|---|---|---|---|
| Schedule C Profit | $50,000 | $75,000 | $150,000 | $200,000 | $275,000 | $360,278 |
| Less SE Tax Deduction | ($3,532) | ($5,299) | ($10,597) | ($14,117) | ($15,121) | ($16,263) |
| Net Earnings for Contribution | $46,468 | $69,701 | $139,403 | $185,883 | $259,879 | $344,015 |
| W-2 Wages for Incorporated Business | ||||||
| W-2 Income | $37,172 | $55,760 | $111,520 | $148,704 | $207,900 | $275,212 |
| SEP Plan | ||||||
| Maximum SEP Contribution | $9,293 | $13,940 | $27,880 | $37,176 | $51,975 | $68,803 |
| Solo 401(k) | ||||||
| 401(k) Deferral | $24,500 | $24,500 | $24,500 | $24,500 | $24,500 | $24,500 |
| Profit Sharing Contribution | $9,293 | $13,940 | $27,880 | $37,176 | $47,500 | $47,500 |
| TOTAL if Less than Age 50 | $33,793 | $38,440 | $52,380 | $61,676 | $72,000 | $72,000 |
| Plus Catch-up if Age 50+ | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 |
| TOTAL if Age 50+ | $41,793 | $46,440 | $60,380 | $69,676 | $80,000 | $80,000 |
| Plus Super Catch-up if Age 60-63 | $11,250 | $11,250 | $11,250 | $11,250 | $11,250 | $11,250 |
| TOTAL if Age 60-63 | $53,043 | $57,690 | $71,630 | $80,926 | $91,250 | $91,250 |
| Solo 401(k) Advantage < 50 | $24,500 | $24,500 | $24,500 | $24,500 | $20,025 | $3,197 |
| Solo 401(k) Advantage 50+ | $32,500 | $32,500 | $32,500 | $32,500 | $28,025 | $11,197 |
A Solo 401(k) permits salary deferral contributions, as well as catch-up contributions for those over 50, in addition to the standard employer profit-sharing contribution.
A SEP IRA is a low-maintenance retirement plan that allows a business owner to make tax-deductible employer contributions on behalf of themselves and any eligible employees. Contributions are limited to a percentage of compensation, with no employee salary deferral feature and no catch-up contributions, which caps total savings potential compared to a 401(k)-style plan.
A Solo 401(k), also called an individual 401(k), is designed for business owners with no full-time employees other than a spouse. It combines an employee salary deferral (up to $24,500 in 2026, plus catch-up amounts) with an employer profit-sharing contribution of up to roughly 25% of compensation, subject to the overall annual additions limit. This two-part structure is what allows total contributions to outpace a SEP IRA at comparable income levels.
For business owners earning below roughly $300,000 in Schedule C income (or $288,000 in W-2 wages), a Solo 401(k) generally allows for substantially higher contributions than a SEP IRA, often by $20,000 or more per year. Above that income range, the two plans tend to converge near the same maximum, since both are bound by the same overall annual additions limit. Owners who are 50 or older, or between 60 and 63, gain an additional advantage from a Solo 401(k) thanks to catch-up and super catch-up contributions, which are not available under a SEP.
Generally, business owners choose one or the other rather than running both at once, since combined contributions are still subject to the same overall annual additions limit. A financial professional can help evaluate whether a transition from an existing SEP to a Solo 401(k) makes sense for your situation.
A Solo 401(k) is available to self-employed individuals and business owners who have no full-time common-law employees other than themselves and, if applicable, a spouse. This includes sole proprietors, single-member LLCs, partners, and sole S-Corporation shareholders.
For 2026, the combined annual additions limit across employee deferrals and employer contributions is $72,000, before catch-up contributions. Savers 50 and older may add an additional $8,000 catch-up, and those age 60–63 may use an enhanced super catch-up of $11,250 instead of the standard catch-up.
Solo 401(k) plans typically involve more plan documentation and, once assets exceed $250,000, an annual Form 5500-EZ filing. SEP IRAs are simpler to administer but offer less contribution flexibility. The right trade-off depends on how much additional contribution capacity is worth the added administration.
Not sure which plan fits your income and goals? The team at PlanPerfect Retirement can model your specific numbers and help you choose — and set up — the retirement plan that lets you save the most, with the least hassle.