Business Tax · Compared
Solo 401(k) vs SEP vs SIMPLE vs Cash Balance Plan
Self-employed and business owners have access to retirement plans most W-2 employees never see. The right plan can shelter $60K-$300K+ per year tax-deferred. This comparison shows what each fits — and which to combine for maximum impact.
TL;DR
Owner-only businesses with no employees should default to Solo 401(k) — most flexible, Roth option, loans allowed. Businesses with employees usually need SIMPLE IRA (small/cheap) or 401(k) with profit sharing (full-featured). High-income owners 45+ with consistent profits should stack a Cash Balance plan on top to shelter $150K-$280K more.
Side-by-side
| Solo 401(k) | SEP IRA | SIMPLE IRA | Cash Balance Plan | |
|---|---|---|---|---|
| 2025 Max Contribution | $70,000 | $70,000 | $16,500 + 3% match | $150K-$280K+ (age-based) |
| Roth Option | Yes | No | No (Roth SIMPLE exists but limited) | No |
| Employees Allowed? | No (owner + spouse only) | Yes (must match equally) | Yes (1-100) | Yes (most flexible) |
| Compliance Cost/Year | $0-200 | $0-50 | $300-1,000 | $2,000-5,000 |
| Best Profit Range | $30K-$280K | $30K-$280K | Under $100K | $250K+ |
Each option, in depth
Solo 401(k)
401(k) for owner-only businesses (and spouse).
Best for: Self-employed individuals, solo consultants, real estate investors, and owner-only S-Corps.
Pros
- Up to $70,000 (2025), $77,500 with catch-up
- Roth option included
- Loans allowed
- Most flexible option
Cons
- Adding any non-spouse employee disqualifies you
- Annual filing required once balance exceeds $250K (Form 5500-EZ)
Cost: Free setup at most brokers
SEP IRA
Simplified Employee Pension — easy setup, pre-tax only.
Best for: Solo owners who want simplicity over flexibility.
Pros
- Easiest setup
- No annual filing
- Up to 25% of compensation, capped at $70,000 (2025)
Cons
- No Roth option
- If you have employees, you must contribute the SAME percentage for them
- No catch-up contributions
Cost: Free setup
SIMPLE IRA
For small businesses with 1-100 employees.
Best for: Small business owners who want to offer a benefit without 401(k) complexity.
Pros
- Cheap to administer
- No annual filing
- Required 3% match is straightforward
Cons
- Lower limit ($16,500 employee deferral in 2025)
- Employer match is mandatory
- Limited investment menu
Cost: Low monthly cost (~$25-75/mo)
Cash Balance Plan
Defined benefit pension plan disguised as a 401(k).
Best for: High-income business owners 45+ with consistent profits looking to catch up retirement savings fast.
Pros
- Shelter $150,000-$280,000+ per year tax-deferred
- Stacks on top of a 401(k)
- Best 'catch-up' vehicle in the tax code
Cons
- Requires actuary + annual TPA fees ($2K-$5K)
- Required to fund each year
- Less flexibility year-to-year
Cost: $2,000-$5,000/year in compliance
Which one should you pick?
Solo 401(k) — if you Are owner-only (or owner + spouse). Want Roth option, loans, and maximum flexibility. Most common right answer for self-employed.
SEP IRA — if you Want simplicity over flexibility, are solo, and don't need Roth. Becomes expensive fast if you add employees.
SIMPLE IRA — if you Have 2-50 employees and need to offer a benefit without 401(k) complexity. Lower limits, but cheap.
Cash Balance Plan — if you Earn $250K+ in business profit, are 45+, and want to catch up retirement savings fast. Pair with a 401(k) for the full effect.
Common questions
Can I have BOTH a Solo 401(k) AND a Cash Balance plan?+
Yes — and this is the highest-shelter combo available to high-income business owners. You can stack $70K Solo 401(k) + $150K-$280K Cash Balance for total deferred contributions of $220K-$350K per year. Common for $500K+ profit owners over 45.
What if I have one employee?+
Adding ANY non-spouse employee disqualifies you from Solo 401(k). You'd move to either SEP (must match employees), SIMPLE, or a traditional 401(k) with profit sharing.
Can I switch from SEP to Solo 401(k)?+
Yes. Many self-employed owners outgrow the SEP once they want Roth contributions, loans, or higher limits at lower compensation levels. Roll the SEP IRA balance into a Solo 401(k) and start fresh.
Are Cash Balance plans for everyone?+
No. They require consistent profit (you must fund every year), an actuary, and a multi-year commitment. They're powerful for high-income business owners 45+ — but for $80K-$150K profit owners, the complexity usually isn't worth it.
Go deeper
Free business retirement plan design
We'll review your income, employee count, age, and goals — and design the plan combination that shelters the most tax dollars for your specific situation.
Educational comparison only. Not financial, tax, or legal advice. Product features and limits change — always confirm specifics with a licensed professional.