When you're self-employed, you're in charge of choosing and funding your own retirement plan. In place of an employer-provided retirement plan like a 401(k), you may consider making contributions to a SEP IRA or solo 401(k) plan. But which one is the better option when it comes to saving money for your retirement? Here are the ins and outs of both SEP IRAs and solo 401(k)s, as well as the pros and cons of each. In the end, you'll need to pick the right plan for your personal retirement strategy.

A financial advisor can help you create a retirement plan for your goals.

What Is a SEP IRA?

A SEP IRA or Simplified Employee Pension is a type of individual retirement account that's designed for small business owners and the self-employed. These plans can be set up by a small business for itself and its employees, if there are any. With this type of plan, only the employer makes contributions; employees don't add any of their own money. However, employees are always 100% vested in their account at all times.

You can make contributions to a SEP IRA as a self-employed person no matter the size of your business or your business structure. That means you can use one of these accounts for retirement savings whether you have a sole proprietorship, limited liability company or corporation.

For 2023, the maximum amount employers can contribute to a SEP IRA is the lesser of 25% of the employee's compensation or $66,000 ($61,000 in 2022). There are no catch-up contributions associated...

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