Why This Decision Matters More Than It Looks
Neither a SEP-IRA nor a Solo 401(k) is available through an employer if you're self-employed — you have to open one yourself, and the one you pick changes both how much you can save and how much you can deduct.
SEP-IRA: Simple, Fast, One Contribution Type
A SEP-IRA lets you contribute up to 25% of net self-employment income, up to $70,000 in 2025 (rising to $72,000 in 2026). It takes about 10 minutes to open at any major brokerage, has almost no paperwork, and every dollar you contribute reduces your taxable income.
Solo 401(k): More Complexity, Often More Room
A Solo 401(k) lets you contribute as both 'employee' and 'employer' — which can mean a higher total contribution than a SEP-IRA at the same income level, especially at lower income where the employee-deferral portion matters more. It also allows Roth contributions, which a SEP-IRA does not. The tradeoff is more setup and annual paperwork once the balance grows past a certain size.
Which One Actually Wins for You
If you want simplicity and your income is solidly mid-to-high, a SEP-IRA usually wins. If you want to maximize contributions at a lower income, want Roth flexibility, or might hire employees later, a Solo 401(k) is often the better fit. Either way, opening one before December 31 is what actually matters most.