If you’re self-employed, you have probably heard of either the SEP IRA or the Solo 401k…
But which is better?
Haley Gant, CISP, discusses the benefits and pitfalls of both accounts and what might interest you to pick one retirement account over the other.
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When considering retirement savings options, the SEP IRA and the Solo 401(k) are two of the most popular choices. Both offer tax advantages, but they have different eligibility requirements and contribution limits. So, which one is better for you?
The SEP IRA is a retirement plan designed for self-employed individuals and small business owners. It allows you to make tax-deductible contributions to an individual retirement account (IRA) for yourself and your employees. The maximum contribution limit is 25% of your net income or $58,000, whichever is less. The SEP IRA is easy to set up and maintain, and there are no administrative fees or costs.
The Solo 401(k) is a retirement plan designed specifically for self-employed individuals and small business owners. It allows you to make tax-deductible contributions to an individual retirement account (IRA) for yourself and your employees. The maximum contribution limit is $57,000 or 100% of your net income, whichever is less. The Solo 401(k) is more complex to set up and maintain, but it offers more flexibility in terms of investment options and contributions.
Both the SEP IRA and the Solo 401(k) offer tax advantages, but there are some key differences to consider. The SEP IRA is easier to set up and maintain, and the contribution limits are higher. However, the Solo 401(k) offers more flexibility in terms of investment options and contributions.
Ultimately, it comes down to your individual situation. If you’re self-employed or a small business owner, you should consider both options and decide which one is best for you. Consider your retirement goals, contribution limits, and investment options to determine which plan is right for you.
Hi thank you for the video and sharing your knowledge. Question if someone made $300,00 as sole owner of a LLC acting as S corp for tax purposes is there any benefit to doing solo K over SEP IRA since you max the $58K contribution limit for 2021?
If someone has a Solo IRA then expands and hires a few W2 employees, then a SEP IRA can be opened and utilized going forward, and the Solo IRA would just coast along and could be sitting there until distributions are allowed?
Great video. If a business owner is not taking a W2 salary, I assume they cannot make salary deferrals. It would only be Employer contributions into a Solo-K at that point, correct?
Thank you very much
For a Solo 401K, an an owner, are you required to make contributions for your spouse?
She's amazing
For a Solo401k, I thought a business owner could have one employee, with that singular employee being their spouse.