Self-Employment Retirement: Solo 401(k) vs. SEP IRA

Introduction: The Real Human Problem

Entrepreneurs, consultants, and small business owners in Salt Lake City have unique retirement options. Without an employer-sponsored plan, you are responsible for your own savings. The choice between a SEP IRA and a Solo 401(k) can impact your contribution limits and tax deductions.

Planning for your future in the Wasatch Front requires a strategy that accounts for local cost of living and specific lifestyle desires. Whether you enjoy skiing at Alta, hiking in the Cottonwood canyons, or raising a family in South Jordan, your financial roadmap should be built around your life—not just a generic set of numbers.

How This Calculator Works (Simply Explained)

To get the most out of this tool, it is helpful to understand the key inputs that drive the results:

Net Self-Employment Income: Your business net profit (Schedule C or K-1).
Business Entity Type: Sole proprietorship, S-Corporation, Partnership, or LLC.
Employee vs. Employer Deferrals: Understanding how Solo 401(k)s allow both, while SEP IRAs only allow employer-style contributions.

By adjusting these inputs, you can model different financial scenarios to see how subtle shifts in your savings rate or portfolio return can impact your long-term wealth.

Scenario: The Power of Planning in Action

Consider this hypothetical scenario: A freelance designer in Salt Lake City operates as an S-Corp, paying himself a hypothetical salary of $90,000. Under a SEP IRA, he can contribute up to a hypothetical 25% ($22,500). However, with a Solo 401(k), he can contribute $23,000 as an employee plus 25% of salary as employer, significantly increasing his total tax-deferred savings. The calculator helps him identify the option that maximizes his deductions.

This scenario highlights how consistent actions and a clear timeline can remove the guesswork from your finances, transforming abstract goals into a concrete roadmap.

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FAQ – Frequently Asked Questions

What is the main advantage of a Solo 401(k) over a SEP IRA?

A Solo 401(k) allows you to save more at lower income levels by combining employee deferrals and employer contributions, whereas a SEP IRA is limited to a flat percentage of income.

Can I have employees with a Solo 401(k)?

No, Solo 401(k) plans are restricted to owner-only businesses and their spouses; if you hire employees, you must transition to a standard 401(k) or SEP IRA.

What is the contribution deadline for self-employed plans?

You can contribute to self-employed plans up to your tax filing deadline, including extensions, providing flexibility in cash flow management.

Beyond the Numbers: Why Fiduciary Advice Matters

While this calculator provides a helpful baseline, it only tells part of the story. Static online tools cannot account for:

Tax Location Strategies: Maximizing the balance between Roth, Traditional, and taxable brokerage accounts.
Utah-Specific Tax Rules: How state income tax and retirement exclusions impact your bottom line.
Asset Allocation vs. Risk Tolerance: Aligning your investments with your actual comfort level.

At Salt Lake Financial Planning, we specialize in providing fee-based fiduciary financial planning and investment management that looks at your entire financial life. We help you move past basic calculator math to build a personalized, tax-efficient strategy.

We worked with Dallas for a comprehensive financial plan. He took the time to understand all aspects of our current finances and our goals and dreams. He helped us see where we were doing well and how we could improve. Knowing the full picture and how to proceed so that we can reach our goals gave us peace of mind and confidence. Thank you so much Dallas!

Travis G

Dallas has consistently been an incredible resource, from everything from car insurance to budgeting to retirement planning. He truly cares & has a great way of communicating options & suggestions. I refer him to people all the time.

Jenelle K

These statements are testimonials by clients of the financial professional as of 05/30/2026. The clients have not been paid or received any other compensation for making these statements. As a result the clients do not receive any material incentives or benefits for providing the testimonials. These views may not be representative of the views of other clients and are not indicative of future performance or success.

Ready to take control of your financial roadmap? Schedule an Initial Strategy Meeting with Dallas Price today to discuss your goals in Sandy, Draper, or South Jordan.

Compliance Disclosures

Any perceived advice is general and broad in nature and not meant to substitute direct consultation and advising. Please contact the applicable professional to go over your situation. Schedule an Initial Strategy Meeting if you’d like more 1-1 advice.

Calculations are for illustrative purposes only, do not represent actual performance of any investment, and do not reflect taxes or advisory fees, which would lower returns.*