By Matthew J. Renaud Sr., ChFC®, President and Founder, Renaud & Company Registered Investment Advisors, a fiduciary RIA, with 34 years in financial services. Tax preparation is available through Renaud Tax & Accounting LLC (Jeannie Renaud, CPA), a separate firm in the same office. Information as of October 2026.
Quick answer: For an owner with no employees other than a spouse, a Solo 401(k) generally allows the most savings at lower and middle incomes because it combines employee deferrals with employer contributions, while a SEP IRA is simpler to run. If you have employees, a Solo 401(k) is not available, and the choice usually becomes a SEP IRA, a SIMPLE IRA, or a full 401(k). For owner-operators in O’Fallon and St. Charles County, the right plan depends on your income, your staff, and how much you want to set aside.
The 2026 numbers
| Plan | Who it fits | 2026 contribution limits |
|---|---|---|
| Solo 401(k) | Owner with no employees (a spouse can participate) | Employee deferral up to $24,500, plus employer contributions; combined limit $72,000 (not counting catch-up) |
| SEP IRA | Owner with or without employees | Employer contributions only, up to 25% of compensation or $72,000 |
| SIMPLE IRA | Smaller employers | Employee deferral up to $17,000, plus an employer match or contribution |
Savers age 50 and older can add catch-up contributions where the plan allows, and larger catch-ups apply at ages 60 to 63.
How they compare
- Contribution room. A Solo 401(k) lets you save as both employee and employer, so a lower-income owner may be able to save more than with a SEP IRA.
- Simplicity. A SEP IRA is easy to open and fund. A Solo 401(k) needs plan documents, and a Form 5500-EZ is generally due once assets reach $250,000.
- Employees. A SEP IRA requires you to contribute the same percentage for eligible employees. A Solo 401(k) ends once you hire eligible employees.
- Roth conversions. Pre-tax balances in SEP and SIMPLE IRAs count toward the pro-rata rule when you do Roth conversions. A Solo 401(k) generally does not.
- Deadlines. Funding and setup deadlines differ by plan and by year. Confirm them with your CPA before year-end.
Where taxes come in
The deduction for your own contributions depends on your net self-employment earnings and other items on your return. Plan setup and the tax return that reports the contribution are handled by separate professionals. Renaud & Company Registered Investment Advisors can help you compare plan designs and invest the money, and Renaud Tax & Accounting LLC, led by Jeannie Renaud, CPA, is a separate firm in the same office that prepares returns under its own engagement.
A simple way to decide
- List whether you have, or expect to hire, employees.
- Estimate how much you can comfortably save.
- Decide how much administration you want to handle.
- Ask your CPA about the deduction and your advisor about the investments.
Frequently asked questions
Can I have a Solo 401(k) if I hire an employee?
A Solo 401(k) is designed for an owner with no employees other than a spouse. Once you have eligible employees, you generally need a different plan, such as a SEP IRA, a SIMPLE IRA, or a full 401(k).
What is the maximum SEP IRA contribution in 2026?
For 2026, SEP contributions are limited to 25% of compensation or $72,000, whichever is less. Special calculations apply to self-employed owners.
Do I need an advisor to open one of these plans?
No. Many custodians offer these plans directly. An advisor can help compare designs, coordinate with your CPA, and manage the investments inside the plan.
Questions about your own situation? Meet with Renaud & Company Registered Investment Advisors virtually from anywhere, or in person at 2112 Bryan Valley Commercial Drive, O'Fallon, MO 63366. Call (636) 240-5055 or email info@renaudco.com.
Educational purposes only. This article is general information, not individualized investment, tax, or legal advice. Rules and figures are as of October 2026 and can change; confirm them before acting. Renaud & Company, LLC is an SEC-registered investment adviser; registration does not imply a certain level of skill or training. Neither Renaud & Company, LLC nor its advisors provide tax or legal advice. Renaud Tax & Accounting LLC is a separate firm, and each firm has its own engagement. Some of our advisors may earn commissions on certain insurance products; we explain how we are paid before you decide. Our Form ADV Part 2A and Form CRS are available at adviserinfo.sec.gov or on request. All investing involves risk, including loss of principal.