Contribution limits, eligibility rules, and the real trade-offs — so you can stop leaving tax-advantaged dollars on the table. Click any plan to learn more.
The SIMPLE IRA is exactly what the name suggests — the lowest-friction way to offer a retirement benefit to a small team. Employees make salary deferrals and you, as the employer, match them. It works like a scaled-down 401(k) without the annual testing, plan documents, or administrative overhead.
The employer match is required — either a dollar-for-dollar match up to 3% of compensation, or a flat 2% contribution for all eligible employees regardless of whether they participate. The 3% match is most common because it only triggers when the employee contributes.
The SEP-IRA is the workhorse plan for self-employed owners and small businesses with variable income. You contribute as the employer only — up to 25% of compensation (or 20% of net self-employment income), capped at $72,000 in 2026. No employee salary deferrals.
The big advantage: flexibility. You decide each year whether to contribute and how much. No minimum. No commitment. And you can open and fund a SEP as late as your tax filing deadline including extensions — giving a sole proprietor until October 15 to fund the prior year's plan.
The catch: whatever percentage you contribute for yourself must be contributed for every eligible employee — no exceptions. If you put in 20%, you owe 20% for your whole crew. That math changes the calculus quickly as headcount grows.
The Solo 401(k) is built for the self-employed owner with no W-2 employees (a spouse on payroll is the one exception). It functions exactly like a full 401(k) — you wear both hats, making contributions as both employee and employer, which is how you can reach the same $72,000 ceiling as larger plans on a much smaller income.
As the "employee," you can defer up to $24,500 of your compensation (pre-tax or Roth). As the "employer," you can contribute an additional 25% of W-2 compensation or 20% of net self-employment income. Those two buckets stack — which gives a solo operator dramatically more savings power than a SEP at lower income levels.
One hard rule: the moment you hire a W-2 employee (other than a spouse), the plan must be converted to a traditional 401(k). Plan for it.
The 401(k) is the gold standard for business owners serious about maximizing retirement savings — and serious about using the plan as a strategic business tool. It's the only plan that scales cleanly from 5 employees to 500, accommodates both Roth and traditional contributions, and can be paired with a profit-sharing component that dramatically increases the owner's contribution ceiling.
A Safe Harbor design eliminates the annual nondiscrimination testing (ADP/ACP tests) that can limit how much a business owner and highly compensated employees can defer. In exchange, you commit to a minimum employer contribution — typically a 3% match or 4% non-elective. For most profitable businesses, this trade is well worth it.
Profit sharing adds a discretionary employer contribution on top of employee deferrals — allowing the total to reach $72,000 in 2026 — and can be structured to favor the owner through age-weighted or cross-tested plan design.
| SIMPLE IRA | SEP-IRA | Solo 401(k) | 401(k) | |
|---|---|---|---|---|
| Max contribution (2026) | $17,000 employee | $72,000 employer | $72,000 combined | $72,000 combined |
| Catch-up age 50+ | +$4,000 | None | +$8,000 | +$8,000 |
| Employees allowed | Yes (≤100) | Yes | Owner only | Yes, any size |
| Employer contribution | Required match | Employer only | Optional | Optional |
| Roth option | No | No | Yes | Yes |
| Loans | No | No | Yes | Yes |
| Admin complexity | Low | Very low | Low – Medium | Medium – High |
| Annual 5500 filing | No | No | If assets > $250k | Required |
| Deadline to open | Oct 1 current yr | Tax deadline + ext | Dec 31 current yr | Dec 31 current yr |
| Best fit | Small team, low cost | Solo, variable income | Self-employed, no staff | Growth stage, max savings |