Solo 401k vs SEP IRA: The Best Retirement Plan for Solopreneurs  

Choosing over Solo 401k vs SEP IRA has its own set of advantages and disadvantages. Each plan has its own special purpose particularly to business owners. It is known that SEP IRA is the best IRA for self employed individuals with large scale business and full time workers. Business owners can take advantage of SEP IRA for their own retirement needs and for the benefit of their employees as well. This plan can be set up easily and with low administration cost.

solo 401k vs sep ira

solo 401k vs sep ira

As for the Solo 401k, this retirement plan is created for the benefit of small business owners or solopreneurs without any fulltime employee working for their business. Both plans—

SEP IRA and Solo 401k are available for small business owners, however, between the two, the Solo 401k would be a more competitive choice. This is because of the features that this self employment 401k have that the SEP IRA could not offer.

Choosing over Solo 401k vs SEP IRA for self employed retirement plan is easy once you learn the purpose of the plan and the benefits you can reap from it.

One of the most important features of the Solo 401k is the built in Roth sub account. This enables plan holders to assign portion of their contribution to the Roth account which provides them tax diversification and the ability to receive tax free distribution come retirement age. Another great feature is the loan access of Solo 401k vs SEP IRA. In times of need, you can borrow money from your retirement saving without the hassle of long process and paper works.

Moreover, unlike SEP IRA, a custodian is not needed whenever you make transactions on your Solo 401k, eliminating added fees and paper processing delays. Both plans can be self-directed in which funds can be invested into more stable choices like real estate, loans, and businesses. Checkbook control is also available for each plan, providing utmost flexibility and control over transactions. It is highly important that retirement plan owners must understand the things they can do and cannot do with their retirement plans so they would be able to strategize better and make the most out of their retirement savings.

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