Comparing Contribution Limits of SEP IRA vs Solo 401(k)
SEP IRA Contribution Limits for 2024
The SEP IRA has an overall contribution limit of $69,000 in 2024. Contributions are treated as employer contributions and are limited to 25% of net self-employment income, capped at $345,000.
- No catch-up contributions available
- Max contribution limited to 20% of net income
Solo 401(k) Contribution Limits for 2024
The Solo 401(k) also has a $69,000 overall contribution limit. It allows for both employer and employee contributions, with a $23,000 employee contribution limit and a catch-up contribution of $7,500 for those 50 or older.
- Higher contribution limits for most self-employed individuals
- Total potential contribution up to $76,500 for 50+ individuals
The Bottom Line
For self-employed individuals looking to maximize contributions, the Solo 401(k) often provides higher limits. Consider your income and age when deciding between the SEP IRA and Solo 401(k) for optimal retirement savings.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.