{
  "slug": "solo-401k-vs-sep-ira",
  "title": "Solo 401(k) vs. SEP IRA Calculator",
  "heading": "Solo 401(k) vs. SEP IRA Contribution Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/solo-401k-vs-sep-ira",
  "summary": "Compare maximum contribution room between a solo 401(k) and a SEP IRA for self-employed income.",
  "description": "Both a solo 401(k) and a SEP IRA let self-employed people shelter retirement income, but they calculate contribution room differently. A SEP IRA allows only an 'employer' contribution of up to 25% of compensation (roughly 20% of net self-employment income after the self-employment tax adjustment), capped at $69,000 for 2024. A solo 401(k) lets you make an 'employee' deferral (up to $23,000, or $30,500 at 50+) on top of the same employer profit-sharing contribution, which usually produces significantly more total contribution room at lower income levels since the employee deferral doesn't depend on a percentage of income the way the employer piece does. This calculator runs both formulas side by side on your actual net self-employment earnings so you can see the real dollar gap, which is often the deciding factor for solo business owners choosing between the two.",
  "formula": "Net SE earnings (adjusted) = net profit × 0.9235. SEP contribution = min(adjusted earnings × 20%, $69,000). Solo 401(k) = min(employee deferral, $23,000 or $30,500) + min(adjusted earnings × 20%, remaining room to $69,000/$76,500).",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=solo-401k-vs-sep-ira",
  "inputs": [
    {
      "id": "netProfit",
      "label": "Net self-employment profit (Schedule C)",
      "kind": "number",
      "hint": null,
      "default": 120000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "age",
      "label": "Your age",
      "kind": "number",
      "hint": null,
      "default": 45,
      "unit": null,
      "min": 18,
      "max": 75
    },
    {
      "id": "maxDeferral",
      "label": "Max out employee deferral in solo 401(k)?",
      "kind": "select",
      "hint": null,
      "default": "yes",
      "options": [
        {
          "value": "yes",
          "label": "Yes"
        },
        {
          "value": "no",
          "label": "No"
        }
      ]
    }
  ],
  "outputs": [
    {
      "id": "advantage",
      "label": "Extra room in solo 401(k) vs. SEP IRA",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "solo401kTotal",
      "label": "Max solo 401(k) contribution",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "sepEmployerContribution",
      "label": "Max SEP IRA contribution",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "employeeDeferral",
      "label": "Employee deferral portion (solo 401k only)",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Net self-employment profit (Schedule C): 120000 $",
      "Your age: 45",
      "Max out employee deferral in solo 401(k)?: Yes"
    ],
    "outputs": [
      "Extra room in solo 401(k) vs. SEP IRA: $23,000",
      "Max solo 401(k) contribution: $45,164",
      "Max SEP IRA contribution: $22,164",
      "Employee deferral portion (solo 401k only): $23,000"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter net self-employment profit (schedule c) ($).",
      "Enter your age.",
      "Enter max out employee deferral in solo 401(k)?.",
      "Read your extra room in solo 401(k) vs. sep ira on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "netProfit": 72000,
        "age": 45,
        "maxDeferral": "yes"
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "netProfit": 120000,
        "age": 45,
        "maxDeferral": "yes"
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "netProfit": 192000,
        "age": 45,
        "maxDeferral": "yes"
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why is a solo 401(k) almost always better at lower income levels?",
      "a": "Because the employee deferral (up to $23,000, or $30,500 at 50+) is a flat amount independent of income, while the SEP's contribution is purely a percentage of earnings. At $60,000 of net profit, a SEP caps out around $11,000, while a solo 401(k) can reach $23,000+ from the deferral alone before even adding the employer piece — a huge gap at modest income."
    },
    {
      "q": "Does a solo 401(k) allow Roth contributions?",
      "a": "Most solo 401(k) plans offered by major brokerages allow a Roth option for the employee deferral portion (though the employer profit-sharing piece is generally pretax only), while a SEP IRA is pretax-only with no Roth option under current rules. This is another point in the solo 401(k)'s favor if you want Roth flexibility."
    },
    {
      "q": "Is a SEP IRA ever simpler or better?",
      "a": "SEP IRAs have lower administrative overhead — no annual Form 5500 filing requirement even at larger balances, and setup is often faster and cheaper. If you have employees (not just yourself), a SEP requires contributing the same percentage for all eligible employees, which can get expensive; a solo 401(k) generally only works if you have no employees other than a spouse."
    },
    {
      "q": "What's the deadline to open and fund each account?",
      "a": "A solo 401(k) generally must be opened by December 31 of the tax year (though funding can happen up until your tax filing deadline, including extensions), while a SEP IRA can be opened and funded as late as your tax filing deadline including extensions — a real advantage if you're deciding late in the year."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/mega-backdoor-401k-capacity",
    "https://www.revenuelab.fyi/toolbox/backdoor-roth-pro-rata",
    "https://www.revenuelab.fyi/toolbox/asset-location-tax-efficiency"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Solo 401(k) vs. SEP IRA Calculator (https://www.revenuelab.fyi/toolbox/solo-401k-vs-sep-ira)"
}