Why 20% instead of 25%?

For self-employed, the 25% employer contribution translates to about 20% of net earnings after the IRS adjustments. This tool uses 20% as a simplification.

Can my spouse also contribute?

If your spouse is eligible and compensated by the business, a Solo 401k can allow a separate employee deferral and employer contribution for them. SEP would require the same percentage for each eligible employee.

What are the 2026 limits?

The 2026 employee deferral limit is $24,500. Catch-up is $8,000 for age 50+ and $11,250 for ages 60–63. The overall annual limit for employer + employee is $72,000 (catch-up allowed above that).

Does this include Roth contributions?

Roth is possible for the employee deferral in many Solo 401k plans. This tool only shows total dollar limits, not pre-tax vs Roth split.

What if I have a W-2 job with a 401k?

Employee deferral limits are shared across all 401k plans. SEP contributions are separate. Adjust deferrals if you already contributed via W-2.

Do I have to include employees?

SEP requires the same percentage contribution for eligible employees. Solo 401k is intended for owner-only businesses. This tool assumes no employees.

What if my income is very low?

Employee deferrals can’t exceed your earned income. If profit is low, the deferral may be limited and the employer portion may be small; the SEP may look similar to the employer portion only.

Can a Solo 401k offer loans?

Many Solo 401k plans can include a loan feature, but it depends on the plan document and custodian. SEP IRAs (and IRAs generally) cannot offer participant loans.

Do Solo 401k plans require an extra tax form?

If plan assets exceed required thresholds, Solo 401k plans typically must file Form 5500‑EZ. SEP IRAs do not have this filing requirement.

Are plan setup and funding deadlines modeled?

No. Solo 401k setup deadlines can differ from SEP establishment/funding timelines. Check current-year rules with your custodian.

Can I contribute after the year ends?

Employer contributions are often allowed up to the tax-filing deadline (with extensions). Employee deferrals generally must be elected/paid within the plan year. This tool does not track timing rules.

What about S-corp reasonable comp rules?

This tool uses net income as a stand-in. S-corp wages vs distributions can change the base for contributions. Consult your tax pro for entity-specific calculations.

Can I roll old SEP funds into a Solo 401k?

Often yes, custodians allow rolling SEP assets into a Solo 401k. This tool focuses on current-year contribution limits, not rollovers; check your custodian’s rules.

finance calculator

Solo 401k vs SEP IRA

Compare maximum contributions for a self-employed person under a Solo 401k (employee + employer) versus a SEP IRA.

Results

Solo 401k employee deferral: $24,500
Solo 401k employer contribution: $24,000
Solo 401k total contribution: $48,500
SEP IRA contribution: $24,000
Catch-up eligible (age 50+): 0.00

Overview

Compare the maximum contribution you can make as a self-employed person under a Solo 401k (employee + employer) versus a SEP IRA, including catch-up eligibility at age 50+. Use this to decide which plan design gives you the most room to save.

A Solo 401k combines employee deferrals with an employer profit‑sharing contribution, so it often wins at lower and mid incomes. A SEP IRA only allows employer contributions, which can lag unless your income is high enough to approach the overall annual cap.

If your spouse works in the business and is eligible to participate, a Solo 401k can allow two employee deferrals plus two employer contributions, dramatically increasing total savings. A SEP would require equal percentage contributions for each eligible employee, which can become expensive if you plan to add staff.

This calculator uses current IRS limits for 2026: $24,500 employee deferral, a $8,000 catch‑up for age 50+, and a higher $11,250 catch‑up for ages 60–63, plus the $72,000 overall plan limit. It applies a simplified 20% self‑employed employer rate to estimate the employer portion.

How to use this calculator

Enter your net self-employment income (after expenses).
Enter your age to determine catch-up eligibility for the Solo 401k deferral.
Review Solo 401k employee deferral, employer contribution, and total vs the SEP IRA contribution.
Try different income levels to see where the SEP begins to lag vs a Solo 401k.
Remember: if you hire employees, SEP requires contributions for them too; this tool assumes no employees.
If you have a W‑2 401k, subtract those deferrals from the Solo 401k employee limit before planning.

Inputs explained

Net self-employment income: Business profit before retirement contributions (simplified input for this model).
Age: Determines catch-up eligibility for Solo 401k elective deferrals at age 50+.

Outputs explained

Solo 401k employee deferral: The max employee deferral based on IRS limits and your age. This limit is shared across all 401k plans.
Solo 401k employer contribution: Estimated employer profit‑sharing portion using a simplified 20% of net self‑employment income.
Solo 401k total contribution: Employee deferral + employer portion, capped at the annual overall limit (plus catch‑up if applicable).
SEP IRA contribution: Estimated SEP employer contribution using the same 20% self‑employment simplification, capped at the annual limit.
Catch-up eligible (age 50+): Indicates whether age-based catch‑up applies (higher catch‑up applies for ages 60–63).

How it works

Employee deferral (Solo 401k) uses the 2026 elective deferral limit of $24,500, plus catch‑up of $8,000 (age 50+) or $11,250 (ages 60–63).

Employer contribution (Solo 401k) is modeled as 20% of net self-employment income to approximate the IRS self-employed formula.

SEP IRA contribution uses the same 20% of net income assumption (the self-employed equivalent of 25% of comp).

Solo 401k total = employee deferral + employer portion, capped at the 2026 overall limit of $72,000 (plus any catch‑up).

Formula

Solo 401k employee deferral = min(annual deferral limit + catch‑up, net income). Employer portion ≈ 20% of net income (self-employed equivalent of 25% of comp). Solo 401k total = deferral + employer portion, capped by the annual overall limit (plus catch‑up if eligible). SEP IRA contribution ≈ 20% of net income, capped at the overall limit.

When to use it

Deciding between opening a Solo 401k or a SEP IRA for a single-member LLC or sole proprietorship.
Maximizing tax-deferred savings in a high-income freelance year.
Seeing how catch-up contributions at 50+ increase Solo 401k headroom vs SEP.
Planning contributions when income fluctuates; Solo 401k often wins at lower incomes because of the deferral.
Understanding the employer-contribution math before filing taxes or running year-end payroll.
Coordinating retirement savings when you and a spouse both have self-employment income and separate plans.
Evaluating plan type before forming an S-corp vs staying sole prop, since compensation definitions can change the math.
Comparing simplicity (SEP) vs flexibility (Solo 401k with Roth or loan features, depending on provider).
Forecasting how much additional savings room you get once you reach age 50 or age 60.
Estimating whether your income is high enough to hit the overall annual cap.
Planning a year with unusually high profit (one-off contract) and deciding which plan captures more deductions.
Estimating how much extra space exists if a spouse joins the business and can make their own deferral.

Tips & cautions

Solo 401k usually wins at lower incomes because you get the employee deferral on top of the 20% employer piece.
Catch-up ($8,000 for age 50+; $11,250 for ages 60–63 in 2026) is only available in the Solo 401k deferral, not SEP.
SEP contributions are simpler administratively but can get costly if you have employees (you must contribute for eligible staff).
If you also have a W-2 job with a 401k, the employee deferral limit is shared across both; adjust your deferral expectations accordingly.
Confirm IRS annual dollar caps (deferral and overall) for the current year; update defaults as limits change.
Net earnings for IRS purposes deduct half of SE tax and deferrals; this tool uses a simplified 20% estimate for speed.
Solo 401k can allow Roth deferrals and plan loans (depending on provider); SEP is traditional-only and IRAs don’t allow loans.
If cash flow is tight, you can still make employer contributions by the tax-filing deadline (plus extensions); plan for timing.
Check custodian paperwork: Solo 401k establishment deadlines differ from SEP setup/funding deadlines.
If plan assets exceed required thresholds, Solo 401k may require Form 5500‑EZ; SEP does not have that filing.
If your spouse earns W‑2 wages from the business, each of you can make an employee deferral—model two scenarios to see the combined impact.
Elective deferrals generally must be elected during the plan year; employer contributions can often be funded later.
Simplified self-employed compensation calc; IRS uses net earnings minus half SE tax and deferrals.
Uses 2026 deferral and overall limits but does not model the exact IRS net earnings worksheet or employer tax adjustments.
Assumes no common-law employees; SEP rules require contributions for eligible employees.
Does not address controlled group, top-heavy, or coverage testing that may apply in larger businesses.
Assumes calendar-year timing and no W-2 deferrals elsewhere; coordination with other plans is up to the user.
Does not model Roth-only catch-up requirements for high earners or after‑tax (mega backdoor) contributions.

Worked examples

Mid-income, under 50

Net income $120,000, Age 35.
Solo 401k: employee deferral $24,500; employer ≈ $24,000 (20% of 120k). Total ≈ $48,500 (under the $72,000 cap).
SEP IRA: ≈ $24,000. Solo 401k clearly allows more.

Lower income freelancer

Net income $60,000, Age 40.
Solo 401k: deferral $24,500; employer ≈ $12,000. Total ≈ $36,500 (under the cap).
SEP IRA: ≈ $12,000. Solo 401k provides far higher space at modest income.

Age 50+ with catch-up

Net income $180,000, Age 52.
Solo 401k: deferral $24,500 + $8,000 catch-up = $32,500; employer ≈ $36,000. Total ≈ $68,500 (under the $72,000 cap + catch-up).
SEP IRA: ≈ $36,000. Catch-up makes Solo 401k more powerful.

Age 60–63 super catch-up

Net income $140,000, Age 61.
Solo 401k: deferral $24,500 + $11,250 catch-up = $35,750; employer ≈ $28,000. Total ≈ $63,750 (under the cap).
SEP IRA: ≈ $28,000. The higher catch-up provides extra Solo 401k space in 2026.

High income hitting plan caps

Net income $400,000, Age 45.
Solo 401k: deferral $24,500; employer 20% = $80,000, but overall plan limit caps the total at $72,000.
SEP IRA: 20% = $80,000, also capped at $72,000. At high income, both converge to the cap.

Coordinating with a day job 401k

Net SE income $90,000, Age 38. W-2 job already deferred $15,000 to a 401k.
Solo 401k deferral remaining = $24,500 − $15,000 = $9,500. Employer ≈ $18,000.
Total Solo 401k ≈ $27,500. SEP ≈ $18,000. Shared deferral limit reduces the Solo advantage but it still leads.

Deep dive

Use this Solo 401k vs SEP IRA calculator to compare maximum self-employed retirement contributions.

Enter net business income and age to see Solo 401k employee deferral, employer contribution, and total versus SEP IRA.

Model catch-up contributions at age 50+ and see how they boost Solo 401k space compared to SEP.

Test different income levels to find where SEP contributions converge with annual plan caps.

Plan year-end contributions for taxes and cash flow by understanding which plan yields the bigger deduction.

Coordinate with a day job 401k by seeing how shared deferral limits change your Solo 401k headroom.

Decide if simplicity (SEP) or maximum space (Solo 401k) better fits your business and cash-flow timing.

Share scenarios with your CPA to lock in deferrals before year-end and make employer contributions by the filing deadline.

Account for the higher 2026 age 60–63 catch-up limit when planning late-career contributions.

Use the $72,000 overall limit as a ceiling when income is high enough to max out employer contributions.

Estimate the combined impact if a spouse participates and can make a second employee deferral.

Compare a SEP’s simplicity against the Solo 401k’s flexibility for Roth deferrals and potential loans.

Methodology & assumptions

Uses 2026 IRS elective deferral and catch‑up limits for Solo 401k employee contributions.
Applies a simplified 20% self‑employment employer rate to estimate profit‑sharing contributions for Solo 401k and SEP IRA.
Caps Solo 401k total at the 2026 overall limit ($72,000) plus catch‑up if eligible; caps SEP at $72,000.
Does not model the IRS net earnings worksheet, half SE tax deduction, or plan-specific deadlines.

Sources

IRS Notice 2025-67 — 2026 retirement plan limitsOfficial 2026 elective deferral, catch-up, and overall plan limits.
IRS News Release — 2026 retirement plan cost-of-living adjustmentsSummary of 2026 401(k) and SEP IRA limits and catch-up changes.

FAQs

Why 20% instead of 25%?: For self-employed, the 25% employer contribution translates to about 20% of net earnings after the IRS adjustments. This tool uses 20% as a simplification.
Can my spouse also contribute?: If your spouse is eligible and compensated by the business, a Solo 401k can allow a separate employee deferral and employer contribution for them. SEP would require the same percentage for each eligible employee.
What are the 2026 limits?: The 2026 employee deferral limit is $24,500. Catch-up is $8,000 for age 50+ and $11,250 for ages 60–63. The overall annual limit for employer + employee is $72,000 (catch-up allowed above that).
Does this include Roth contributions?: Roth is possible for the employee deferral in many Solo 401k plans. This tool only shows total dollar limits, not pre-tax vs Roth split.
What if I have a W-2 job with a 401k?: Employee deferral limits are shared across all 401k plans. SEP contributions are separate. Adjust deferrals if you already contributed via W-2.
Do I have to include employees?: SEP requires the same percentage contribution for eligible employees. Solo 401k is intended for owner-only businesses. This tool assumes no employees.
What if my income is very low?: Employee deferrals can’t exceed your earned income. If profit is low, the deferral may be limited and the employer portion may be small; the SEP may look similar to the employer portion only.
Can a Solo 401k offer loans?: Many Solo 401k plans can include a loan feature, but it depends on the plan document and custodian. SEP IRAs (and IRAs generally) cannot offer participant loans.
Do Solo 401k plans require an extra tax form?: If plan assets exceed required thresholds, Solo 401k plans typically must file Form 5500‑EZ. SEP IRAs do not have this filing requirement.
Are plan setup and funding deadlines modeled?: No. Solo 401k setup deadlines can differ from SEP establishment/funding timelines. Check current-year rules with your custodian.
Can I contribute after the year ends?: Employer contributions are often allowed up to the tax-filing deadline (with extensions). Employee deferrals generally must be elected/paid within the plan year. This tool does not track timing rules.
What about S-corp reasonable comp rules?: This tool uses net income as a stand-in. S-corp wages vs distributions can change the base for contributions. Consult your tax pro for entity-specific calculations.
Can I roll old SEP funds into a Solo 401k?: Often yes, custodians allow rolling SEP assets into a Solo 401k. This tool focuses on current-year contribution limits, not rollovers; check your custodian’s rules.

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Simplified self-employed contribution estimator. Does not enforce exact IRS formulas, overall annual limits, or shared deferral limits across multiple jobs/plans. Assumes no employees and calendar-year timing. Confirm contributions and eligibility with your tax advisor and plan custodian before filing.