Thinking Solo

Solo 401k vs SEP IRA

Aug 27, 2026 · 17 min · 8 segments

Welcome to Thinking Solo with host Ryan Derousseau, CFP®, EA, where we talk about ways to succeed in business and life. In this episode, we break down the key similarities and differences between the…

Welcome to Thinking Solo with host Ryan Derousseau, CFP®, EA, where we talk about ways to succeed in business and life. In this episode, we break down the key similarities and differences between the Solo 401k and the SEP IRA to help self-employed entrepreneurs choose the right retirement plan. We also discuss how business structure and employee rules impact your decision, followed by a movie review of Pig. **In this episode:** 🔸 Learn how both options allow solo business owners to build long term retirement wealth 🔸 Discover how the flexible contribution limits work for employee and employer portions 🔸 Understand why high earners often benefit more from choosing a Solo 401k 🔸 Explore critical employee rules that could create unexpected tax penalties for SEP IRAs 🔸 Compare startup deadlines and documentation needs for setting up your retirement account 🔸 Learn how your S Corp structure impacts your maximum potential retirement contributions 🔸 See why a Solo 401k often encourages consistent ongoing retirement saving habits 🔸 Gain key lessons on entrepreneurial passion from a review of the film Pig Be sure to subscribe to the channel and share this episode with other solo entrepreneurs looking to optimize their retirement strategy. For more insights on building business wealth and reaching your goals, visit thinkingcapfinancial.com today. Thanks for tuning in, and in the meantime… keep grinding. #ThinkingSolo #Solo401k #SEPIRA #RetirementPlanning #Solopreneur #SmallBusiness — Connect with Ryan Derousseau, CFP Email: Ryan@unitedfpg.com LinkedIn: https://www.linkedin.com/in/ryanderousseau/ Website: https://thinkingcapfinancial.com/

Welcome to Thinking Solo with host Ryan Derousseau, CFP®, EA, where we talk about ways to succeed in business and life. In this episode, we break down the key similarities and differences between the…

Speakers: Ryan DerousseauHost

Shared Benefits of Solo 401(k)s and SEP IRAs1:16 – 3:28

Ryan DerousseauHost

1:16

All right, so today we're talking about the Solo 401k versus the SEP IRA.

Ryan DerousseauHost

1:20

And when we're doing this, what we're trying to evaluate is what is the best retirement tool for you? Not what is the best retirement tool for everyone, what is the best one for you? Because the difference between what happens when you are an employee is you are just given a tool that the company provides because that is best for everyone.

Ryan DerousseauHost

1:42

Well, you operate as a solo entrepreneur.

Ryan DerousseauHost

1:46

You get to choose what is best for you.

Ryan DerousseauHost

1:48

And that gives you a few different options based on the size of your business, how many employees you have, what's your revenues like, what's your profits like.

Ryan DerousseauHost

1:57

And so today, let's break down two common choices, the solo 401k and the SEP IRA.

Ryan DerousseauHost

2:04

First, I'm going to talk about the similarities because the similarities are, you know, there's a good amount, but then it's the differences that we're going to really dig into.

Ryan DerousseauHost

2:13

Let's talk about the similarities first.

Ryan DerousseauHost

2:14

The big similarities are that both the Solo 401k and SEP IRA are, in fact, retirement accounts that help you put money into retirement.

Ryan DerousseauHost

2:23

a retirement account and you get a tax advantage by doing so.

Ryan DerousseauHost

2:27

They both have the ability to put $72,000 a year into that account, up to $72,000.

Ryan DerousseauHost

2:34

That seems like a lot more than what you would typically hear for your W-2 job or an employee, right? Well, we're going to talk about why that is in a minute, but that's the max contribution.

Ryan DerousseauHost

2:45

That doesn't mean you have to put $72,000 in in order to use these.

Ryan DerousseauHost

2:48

Of course, if you are putting $10,000 in a year, that is way better than putting nothing in.

Ryan DerousseauHost

2:52

And so I'm just using the max contributions to give you a sense of how they are alike.

Ryan DerousseauHost

2:57

It does not discourage the use of either one of them.

Ryan DerousseauHost

3:01

They can both build wealth and assets long-term, so you're able to invest them long-term, and they both serve as a deduction vehicle for your business.

Ryan DerousseauHost

3:14

So we're reducing income, but we're keeping a lot of the money and we're saving long-term.

Ryan DerousseauHost

3:20

So these are all good things, whether you're choosing the Solo 401k in the SEP IRA.

Ryan DerousseauHost

3:25

But let's now talk about the big differences.

Shared Benefits of Solo 401(k)s and SEP IRAs1:16 – 3:28

Ryan DerousseauHost

1:16

All right, so today we're talking about the Solo 401k versus the SEP IRA.

Ryan DerousseauHost

1:20

And when we're doing this, what we're trying to evaluate is what is the best retirement tool for you? Not what is the best retirement tool for everyone, what is the best one for you? Because the difference between what happens when you are an employee is you are just given a tool that the company provides because that is best for everyone.

Ryan DerousseauHost

1:42

Well, you operate as a solo entrepreneur.

Ryan DerousseauHost

1:46

You get to choose what is best for you.

Ryan DerousseauHost

1:48

And that gives you a few different options based on the size of your business, how many employees you have, what's your revenues like, what's your profits like.

Ryan DerousseauHost

1:57

And so today, let's break down two common choices, the solo 401k and the SEP IRA.

Ryan DerousseauHost

2:04

First, I'm going to talk about the similarities because the similarities are, you know, there's a good amount, but then it's the differences that we're going to really dig into.

Ryan DerousseauHost

2:13

Let's talk about the similarities first.

Ryan DerousseauHost

2:14

The big similarities are that both the Solo 401k and SEP IRA are, in fact, retirement accounts that help you put money into retirement.

Ryan DerousseauHost

2:23

a retirement account and you get a tax advantage by doing so.

Ryan DerousseauHost

2:27

They both have the ability to put $72,000 a year into that account, up to $72,000.

Ryan DerousseauHost

2:34

That seems like a lot more than what you would typically hear for your W-2 job or an employee, right? Well, we're going to talk about why that is in a minute, but that's the max contribution.

Ryan DerousseauHost

2:45

That doesn't mean you have to put $72,000 in in order to use these.

Ryan DerousseauHost

2:48

Of course, if you are putting $10,000 in a year, that is way better than putting nothing in.

Ryan DerousseauHost

2:52

And so I'm just using the max contributions to give you a sense of how they are alike.

Ryan DerousseauHost

2:57

It does not discourage the use of either one of them.

Ryan DerousseauHost

3:01

They can both build wealth and assets long-term, so you're able to invest them long-term, and they both serve as a deduction vehicle for your business.

Ryan DerousseauHost

3:14

So we're reducing income, but we're keeping a lot of the money and we're saving long-term.

Ryan DerousseauHost

3:20

So these are all good things, whether you're choosing the Solo 401k in the SEP IRA.

Ryan DerousseauHost

3:25

But let's now talk about the big differences.