What's the Difference Between a SEP-IRA and a Solo 401(k)?

Both a SEP-IRA and a Solo 401(k) are retirement accounts designed for self-employed individuals and small business owners, and both offer high contribution limits and tax advantages. A SEP-IRA is simpler to set up and has no annual filing requirements, but contributions are limited to 25% of net self-employment income, up to $69,000 in 2024. A Solo 401(k) allows you to contribute both as the employer and as the employee, which lets you save more money at lower income levels — especially if your net income is under $100,000. Solo 401(k) plans also allow Roth contributions and the option to take loans from the account, neither of which is available with a SEP-IRA. If maximizing your retirement contributions is your goal, a Solo 401(k) often lets you get there with less income.