From the brief · Freelancers · 3 min read
Solo 401(k) beats SEP-IRA for most 1099 earners under $150K
Default to a SEP-IRA out of habit and your tax-advantaged ceiling is probably $5K–$15K lower than it could be.
By The MoneyBrief Team ·
The Solo 401(k) (a one-participant 401(k) for self-employed people with no full-time employees other than a spouse) lets you contribute as both employee and employer. The 2026 employee elective deferral is $24,500 (IRS) — and that piece is what most freelancers miss when they default to a SEP-IRA, which only allows the employer-side contribution.
For a freelancer netting $80K, the SEP-IRA caps total contributions at roughly $20,000. The Solo 401(k) at the same income lets you defer the full $24,500 as employee, then add the employer piece on top. At $100K net income, the Solo 401(k) edge is typically $5K–$15K of additional pre-tax space per year.
The takeaway
If you're 1099 and on a SEP-IRA out of habit, your tax-advantaged ceiling is probably $5K–$15K lower than it could be. The Solo 401(k) plan adoption deadline for 2026 contributions is December 31 — but earlier is better if you want payroll-style deferrals.
Sources: IRS
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