Comparing Self-Employed Retirement Plans: Solo 401(k) vs. SEP IRA vs. SIMPLE IRA

Here's how three common retirement savings plans for self-employed workers stack up based on contribution limits, costs and more.

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Whether you're a full-fledged small-business owner or you just run a business on the side, there are several smart ways to save for retirement that are specifically designed for the self-employed. Here's a comparison of three popular self-employed retirement savings plans: the solo 401(k), the SEP IRA and a SIMPLE IRA. See which option is right for your retirement planning needs.

Solo 401(k)

Works well for: A self-employed business owner with no employees or a worker participating in an employer’s 401(k) who also has a side business.

How much you can contribute: As an employee, you can contribute up to $18,500 for 2018, plus up to $6,000 extra if you are 50 or older. As a sole proprietor, you can contribute 20% of your company’s net earnings. For 2018, total contributions can’t exceed $55,000 (not counting the catch-up contribution).

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Maximize it: If you have a side gig and work for a company with a retirement plan, contribute to both.

How much it costs: There’s usually no annual maintenance fee, but you’ll need to file an annual IRS Form 5500 if your plan assets exceed $250,000.


Works well for: Self-employed people with fluctuating incomes (such as real estate agents) or a business with 100 or fewer employees. Both employer and employee can contribute.

How much you can contribute: Up to $12,500 in salary deferrals, or $15,500 if 50 or older. Employers match employee contributions up to 3% of compensation, which can be reduced to 1% in any two out of five years. Or an employer can contribute 2% of each employee’s compensation, up to $5,500.

Maximize it: Some firms start out with a SIMPLE IRA and then change to a 401(k) when they have more employees or want to match more than the 3% limit in a SIMPLE plan.

How much it costs: Costs vary by plan provider. Fidelity, for example, charges an annual fee of $25 per participant, or a $350 plan fee.


Works well for: A small business with only a few employees or a self-employed owner who might have made a nice profit last year but needs more time to establish a plan. (You have until October 15, 2018, to set up a plan for 2017. Other plans must be set up by the end of the year for which contributions are made.)

How much you can contribute: No employee contributions. You as the employer can contribute up to 20% of your net income, to a maximum of $55,000.

Maximize it: Only the employer can contribute. Whatever percentage you select, you must contribute the same percentage of compensation for each employee.

How much it costs: There often is no setup or annual maintenance fee. Check with brokerage and mutual fund companies that sponsor SEPs.

Mary Kane
Associate Editor, Kiplinger's Retirement Report
Mary Kane is a financial writer and editor who has specialized in covering fringe financial services, such as payday loans and prepaid debit cards. She has written or edited for Reuters, the Washington Post,, MSNBC, Scripps Media Center, and more. She also was an Alicia Patterson Fellow, focusing on consumer finance and financial literacy, and a national correspondent for Newhouse Newspapers in Washington, DC. She covered the subprime mortgage crisis for the pathbreaking online site The Washington Independent, and later served as its editor. She is a two-time winner of the Excellence in Financial Journalism Awards sponsored by the New York State Society of Certified Public Accountants. She also is an adjunct professor at Johns Hopkins University, where she teaches a course on journalism and publishing in the digital age. She came to Kiplinger in March 2017.