Solo 401(k) — Individual 401(k)
Best for: sole proprietors with no employees (other than spouse)
SEP-IRA — Simplified Employee Pension
Best for: high-income self-employed, side businesses, simplicity
SIMPLE IRA
Best for: small businesses with 1–100 employees wanting a simple plan
Defined Benefit Plan
Best for: high earners age 50+ wanting to defer $100K–$300K/year
| Factor | Solo 401(k) | SEP-IRA | SIMPLE IRA | Defined Benefit |
|---|---|---|---|---|
| 2024 max contribution | $69,000 ($76,500 age 50+) | $69,000 (25% of income) | $16,000 employee + 3% match | Up to $275,000/yr benefit |
| Roth option | ✓ Yes | No | No | No |
| Employee deferrals | ✓ Yes — up to $23K | No | ✓ Yes — up to $16K | No |
| Employees allowed | Spouse only | Yes — must contribute equally | Yes — up to 100 | Yes — costly |
| Loan provision | ✓ Yes | No | No | Sometimes |
| Setup deadline | Dec 31 of plan year | Tax filing deadline | Oct 1 of plan year | Dec 31 of plan year |
| Best for | Sole proprietors maximizing Roth | High earners wanting simplicity | Small businesses with employees | High earners 50+ maximizing deductions |
The Solo 401(k) + Roth strategy — maximum flexibility for self-employed
Why the Solo 401(k) wins for most self-employed: It allows both employee deferrals (which can be Roth) and employer profit-sharing contributions (pre-tax), loan access, and the highest contribution limits for single-person businesses. A self-employed individual earning $150,000 net can contribute $23,000 as a Roth employee deferral plus approximately $26,000 as a pre-tax employer contribution — splitting the tax benefit across both strategies in the same plan.
Before 2026: Maxing the Roth portion of a Solo 401(k) now — while TCJA rates are lower — locks in tax-free treatment on those funds permanently. The pre-tax employer contribution simultaneously reduces your current-year self-employment tax bill.
Defined benefit + Solo 401(k) — the maximum deferral combination
For self-employed individuals with high consistent income — particularly those ages 50–65 with a limited runway to retirement — combining a defined benefit plan with a Solo 401(k) produces the highest possible annual tax deduction available to any individual. The defined benefit plan contribution is actuarially determined to fund a target benefit, often allowing $150,000–$300,000 in additional deductions above the $69,000 Solo 401(k) limit. Total deferrals of $200,000–$350,000 per year are achievable for high-income earners, dramatically compressing taxable income.
Set up before December 31 — Solo 401(k) deadline is firm
A Solo 401(k) must be established by December 31 of the plan year — even if contributions can be made up to the tax filing deadline. A SEP-IRA can be established and funded up to the tax filing deadline including extensions. If you are self-employed and have not yet set up a retirement plan for this year, act now — missing the Solo 401(k) setup deadline means forfeiting the employee deferral portion of the contribution limit for that year.