How does a SEP-IRA compare to a solo 401(k) for a self-employed freelancer with no employees?

Contribution limits (2026 numbers)

A SEP‑IRA has one simple rule: you, wearing your employer hat, put away up to 25% of your net self‑employment earnings, capped at $72,000 [1][2][3][5][6][17]. There are no separate “employee” contributions and no extra catch‑up for those 50 or older [4].

A solo 401(k) lets you wear two hats.

• As the employee, you can defer up to $24,500 of your pay [10].
• As the employer, you can still add 25% of your compensation (the same yardstick as the SEP‑IRA) [8].
• The total you can put in, including both roles, is $72,000 [7][9][11][12]. If you’re 50 or older, you can toss in an extra $8,000 catch‑up, raising the ceiling to $80,000 [7].

Because the solo 401(k) lets you fill that employee bucket first, it often lets you tuck away more at the same income level. For a freelancer earning $150,000, a SEP‑IRA would allow about $37,500, while a solo 401(k) would allow about $62,000 [16].

Administrative duties

• Solo 401(k): If your plan balance hits $250,000, you must file Form 5500‑EZ with the IRS each year [22][24]. Setup is still described as simple paperwork for a sole proprietor [14][21].
• SEP‑IRA: The evidence provided does not mention any similar annual filing requirement. Since only the employer (you) contributes, ongoing paperwork is generally lighter [4].

Access to your money

• SEP‑IRA: You can take out money at any time — no need to prove hardship [25][27]. However, if you’re under 59½, expect to pay income tax plus a 10% early‑withdrawal penalty on the taxable part [26].
• Solo 401(k): The supplied evidence doesn’t cover withdrawal rules for a solo 401(k), so we can’t draw a direct comparison on this point from these sources.

Tax treatment

Both plans offer meaningful tax‑advantaged saving for a one‑person shop [14]. Contributions are generally pre‑tax, lowering your current taxable income — though the finer details aren’t expanded on in the provided snippets.

Who qualifies

• To open a solo 401(k), you must earn your income from your own business and have no full‑time employees [20][23].
• A SEP‑IRA also works for a freelancer with no employees — the rule that says you must contribute the same percentage for all employees doesn’t create extra costs when you’re the only one [4].

In a nutshell

For a self‑employed freelancer with no employees, both options are on the table [13]. The evidence points to a clear trade‑off:

• The SEP‑IRA is the easygoing choice: simple, flexible withdrawals (with the usual early‑distribution penalty), and no extra reporting as your nest egg grows.
• The solo 401(k) typically lets you save more at the same income because of the employee deferral, and it throws in a catch‑up boost for those 50+. The trade‑off is a little more paperwork once your account crosses $250,000.

If you want to salt away the largest pretax amount possible, the numbers favor the solo 401(k) [16] — without any extra employees, the extra employer‑role rules in a SEP‑IRA don’t hold you back, but the solo 401(k)’s two‑hat design simply gives you a bigger shovel.