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Guide Self-Employed Retirement
Level Beginner to Wealth
Content 9 Essential Guides
Wealth Builder Series

Solo 401(k) vs SEP IRA: Which Plan Builds Wealth Faster?

Do you want to retire rich? This step-by-step setup guide (Solo 401k eligibility, contribution limits, deadlines, Form 5500-EZ) helps self-employed earners build tax-free wealth.

Solo 401k vs SEP IRA Strategic Planning Desk
BMT Tax Research Team Reviewed by J.D. & CPA · Jan 2026
01. Who Needs This?

Check if this applies to you:

  • Are you self-employed (or 1099)? ✔
  • Do you have NO full-time employees? ✔
  • Do you want to maximize tax deductions? ✔
  • Do you want to invest in crypto/real estate? ✔

Your Status

LIKELY ELIGIBLE Status depends on employee structure
02. How It Works
1. The Vehicle Solo 401k (or SEP)
2. The Fuel Employer + Employee
3. The Growth Tax-Deferred / Roth
4. Compliance Form 5500-EZ
Step 1

Solo 401k Eligibility: Do You Actually Qualify?

First confirm you qualify (employee rules). If you qualify, we can compare Solo 401k vs SEP next.

SHORT ANSWER: You likely qualify if you have no eligible employees (spouse is usually okay). If you hire eligible employees later, a Solo 401k may no longer be allowed.

Note: “Eligible employees” definitions depend on plan rules — see ART 202.

If this answers your question, you do NOT need the deep dive below.
After You QualifyLikely Next Step
Max ContributionRead ART 201 (Run the numbers)
Easy SetupRead ART 201 (See setup trade-offs)
Roth Option?Read ART 201 (Roth vs pre-tax)

Wealth Potential

  • Higher Limits
  • Roth Options
  • Loan Access
📂 Optional Brief (Exceptions) Eligibility Exceptions & Edge Cases
→
ART 202 Solo 401k Eligibility Requirements ART 201 Solo 401k vs SEP IRA: Wealth Comparison ART 203 Best Providers: Fidelity vs Vanguard
Step 2

Solo 401k Contribution Limits & Deadlines

You wear two hats: Employee and Employer. This means you can double-dip on contributions.

RULE #1: Plan setup deadline and funding deadline are different. Calculate employee deferral + employer profit sharing carefully.

If this answers your question, you do NOT need the deep dive below.

Key Rules to Remember

  • Employee Limit: Up to the annual IRS limit (see ART 204).
  • Employer Limit: Depends on entity type (see ART 204).
  • Deadlines: Setup vs funding deadlines differ (see ART 205).

Contribution Goals

  • Maximize Salary Deferral
  • Calculate Profit Sharing
  • Fund Before Deadline
📂 Optional Brief (Calculations) High-Income & Aggressive Deduction Scenarios
→
ART 204 Contribution Limits Explained ART 205 Contribution Deadlines ART 209 Spouse Strategy: Double Your Limit
Step 3

Risk & Optional Enhancements

Great wealth brings great responsibility. Don’t fall into the IRS penalty trap.

SHORT ANSWER: Watch out for the IRS filing threshold. Once your plan assets cross this line, you MUST file Form 5500-EZ to avoid penalties.

If this answers your question, you do NOT need the deep dive below.
Plan AssetsAction Required
Assets Below LimitNo Annual Filing
Assets Above LimitFile Form 5500-EZ
Closing PlanFile Final 5500-EZ
Threshold details and how to file are covered in ART 206.

Compliance Status

  • Deadlines Met
  • Forms Filed
📂 Optional Brief (Edge Cases) Audit Defense & Complex Compliance
→
ART 206 Form 5500-EZ Instructions ART 207 Solo 401k Loans Guide ART 208 Mega Backdoor Roth Strategy
🗺️
Visual Blueprint Solo 401k Wealth Flow Map
→
07. 8-Step Setup Checklist
My Configuration ⚙
Plan TypeSolo 401k
Tax Form5500-EZ
LimitIRS Max
Suggested Order (If Applicable) CHECKLIST
01 Check Eligibility (No Employees)
02 Choose Provider (Fidelity/E-Trade)
03 Get EIN (For 401k Plan)
04 Sign Plan Documents
05 Open Trust/Brokerage Account
06 Set Up Logins & Rollovers
07 Fund by your funding deadline
08 File 5500-EZ when required (assets threshold)
Don’t Do This ⚠
  • ✖ Hiring Full-Time Staff
  • ✖ Missing the plan setup deadline
  • ✖ Missing required filings (5500-EZ)
  • ✖ Wrong EIN on Forms
Documents Needed ℹ
Save These Files
Adoption Agreement Trust Agreement EIN Letter Beneficiary Form Contribution Logs
Who Can Help
1. CPA ▶ 2. Plan Provider ▶ 3. Advisor
“Building wealth is not about how much you earn. It’s about how much you keep.”
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Retirement plan rules, tax regulations, and reporting requirements (including Form 5500-EZ) vary by jurisdiction and are subject to change. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
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