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.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

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).

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
SIMPLE IRA
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.
SEP IRA
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.
-
-
Gaining More Certainty in Your Retirement Income Plan
Relying on market performance to close the gap in your retirement income could let you down, but a CD ladder and fixed annuities could provide some certainty.
By Cole Czajkoski, Investment Adviser Representative • Published
-
Considering a 1031 Exchange? The Rules You Need to Know
Taxes are an inevitable part of investing in real estate. You can, however, defer or avoid paying capital gains taxes by following some simple rules of a 1031 exchange. Yes, you read that correctly!
By Daniel Goodwin • Published
-
Best Foreclosure Sites for Finding Properties
Making Your Money Last Wondering how to find foreclosed homes for sale for your next residence or to flip for a profit? These websites will guide you to foreclosures and real estate owned properties to buy.
By Bob Niedt • Last updated
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck • Published
-
Retirees: Your Next Companion May Be a Robot
happy retirement Robots may help fill the gap left by a shortage of humans to help older adults live independently.
By Alina Tugend • Published
-
Is Relief from Shipping Woes Finally in Sight?
business After years of supply chain snags, freight shipping is finally returning to something more like normal.
By David Payne • Published
-
Using Your 401(k) to Delay Getting Social Security and Increase Payments
retirement Your 401(k) can be a bridge from retirement to higher monthly income.
By Elaine Silvestrini • Published
-
How Do I Stop Robocalls From Scamming Me?
retirement The scammers have automated their efforts to separate you from your money. We have ways to make it stop.
By Elaine Silvestrini • Published
-
A Kiplinger-ATHENE Poll: Retirees Are Worried About Money
Making Your Money Last Concerns about recession, inflation and health care costs weigh on retirees and near retirees.
By the editors of Kiplinger's Personal Finance • Published
-
Grandparent Scams Get Victims in Their Hearts
Scams If you get a call from someone who claims to be your grandchild in trouble and needing money right away, be wary. Don’t send any money or give any information until you verify the story.
By Elaine Silvestrini • Published