SEP IRA vs Solo 401(k) 2027 Comparison Calculator
Compare maximum 2027 contributions to a SEP IRA vs Solo 401(k) for a self-employed sole proprietor or S corp owner.
SEP IRA vs Solo 401(k) for 2027
Both plans target self-employed individuals, but Solo 401(k) almost always wins at incomes under ~$345K because it adds an employee deferral ($24,500 in 2027, $32,000 with catch-up at 50+) ON TOP OF the same 20% employer profit-share that SEP allows. SEP is simpler — Form 5305-SEP is one page — but the simplicity costs $10K-$30K of annual contribution room at most income levels. Source: IRC §408(k), §401(k), Rev. Proc. 2024-40. Last updated: May 2026.
When Solo 401(k) Wins (Almost Always)
For 2027, Solo 401(k) lets you contribute the LESSER of $73,500 (under 50) or 100% of pay. SEP IRA lets you contribute 20% of net SE earnings (max $70,000 absolute). At $100K profit: SEP = $20,000, Solo 401(k) = $44,500 ($24,500 deferral + $20,000 employer). Solo 401(k) wins by $24,500. At lower incomes the gap is even bigger as a percentage.
When SEP IRA Wins
SEP wins only when: (1) you're a freelancer who didn't open a plan before Dec 31 — SEP can be opened by the extended tax-return due date (April/October next year), whereas Solo 401(k) had to exist by year-end. (2) You employ part-time helpers — SEP requires equal % to all employees over 21 with 3 of last 5 years service, which can be expensive. Solo 401(k) only allows the owner + spouse.
Roth Option: Big Solo 401(k) Edge
Solo 401(k) allows Roth deferrals (after-tax) of the full $24,500/$32,000 employee portion. SEP IRA must be all pre-tax. For mid-career professionals expecting higher future tax rates, Roth Solo 401(k) can be transformative — locking in today's lower rate on tax-free growth. SECURE 2.0 also allows in-plan Roth conversions of employer contributions in some plans.