Retirement Planning for the Self-Employed: SEP-IRA vs Solo 401(k)
Last updated July 2, 2026
Last reviewed July 8, 2026
Self-employed workers face a retirement savings challenge that employees with workplace 401(k) plans do not: no automatic contributions, no employer match, and a wider set of plan choices to sort through. The two primary tax-advantaged retirement accounts available to many self-employed workers are a SEP IRA and a Solo 401(k). For 2026, a Solo 401(k) can allow an employee deferral up to $24,500 before catch-up contributions, plus an employer contribution based on adjusted self-employment earnings, with the regular combined annual additions limit capped at $72,000 before catch-up amounts. SEP IRA contributions use the self-employed contribution worksheet rather than a simple 25 percent of unadjusted net income; after the half self-employment tax adjustment, the effective maximum rate is commonly about 20 percent of net self-employment income.
The Solo 401(k) can be attractive when the employee deferral component allows more contribution at moderate income levels, but it is not automatically superior for every self-employed worker. A SEP IRA may be simpler, especially for someone who wants an employer-style contribution only. Roth treatment also needs current plan-document review: SECURE 2.0 allowed Roth SEP and SIMPLE contributions, but availability depends on the custodian and plan setup. Solo 401(k) plans can also allow Roth employee deferrals and, in some plans, loans, but those features are plan-specific.
Use the self-employment retirement calculator to compare the contribution room under the plan type and age you enter, then verify the result against IRS Publication 560, your plan document, and a tax professional before funding the account. The calculator is a planning screen for contribution capacity; it is not a recommendation to choose one plan automatically or a substitute for the self-employed contribution worksheet.