Why is a Solo 401(k) better than a SEP-IRA?

A Solo 401(k) allows you to contribute up to $23,000 as an employee even on moderate profits, PLUS 20% to 25% as the employer. A SEP-IRA only allows the 20% to 25% employer portion.

Updated: August 2026 • Verified v1.2

Solo 401(k) Contribution & Tax Shelter Calculator

Finance & MathPopular

Local Browser Execution: Your input is processed locally in your browser and is not sent to UTL servers.

Solo401k = Min(69000, Employee_Deferral + Employer_ProfitShare); Employee = Min(Comp, 23000)

Was this calculation helpful?

Understanding Your Results

Calculates employee elective deferral (up to $23,000 / $30,500 if age 50+), employer profit sharing (20% - 25%), total combined contribution (capped at $69,000 / $76,500), advantage over SEP-IRA, and immediate tax savings.

Practical Guidance & Next Steps

A Solo 401(k) allows high contributions even at modest income levels: someone earning $100,000 can shelter up to $41,000 in a Solo 401(k) vs only ~$18,500 in a SEP-IRA.

What is this?

A retirement planning utility that calculates maximum allowable contributions and tax savings for Solo 401(k) / Individual 401(k) plans.

How does it work?

1. Choose business structure (Sole Prop / 1099 or S-Corp) and enter net earnings. 2. Toggle Age 50+ catch-up if applicable. 3. View employee deferral, employer profit-sharing, total tax contribution, and advantage over SEP-IRA.

Why use it?

Maximizes legal retirement tax shelters for owner-only businesses.

Technical Scope & Calculation Limitations

Models IRS statutory 2024 contribution limits and sole prop / S-Corp formulas.

Frequently Asked Questions

Any business owner, freelancer, or 1099 contractor who generates self-employment income and has no full-time employees other than themselves and their spouse is eligible for a Solo 401(k).

Windows Desktop & Widget Options