What’s the difference between a solo 401(k) and a SEP IRA?

Both SEP IRAs and solo 401(k)s offer tax benefits and saving options for retirement. However there are a few differences. SEP IRAs have higher contribution limits and are a better option for small businesses that have employees (note that SoFi doesn’t support multi-participant IRAs). Solo 401(k)s offer Roth options and loans.

Does it cost money to open a SEP IRA?

No. You can open a SoFi SEP IRA at no cost.

What are the SEP IRA contribution limits for 2024?

In 2024, you can contribute up to 25% of your net earnings, but no more than $69,000.

When do I pay taxes on a SEP IRA?

You’ll pay income taxes when you withdraw in retirement. You may also be subject to a 10% tax penalty for withdrawing before age 59 ½.

Who pays taxes on a SEP IRA?

A SoFi SEP IRA account holder will pay taxes on their withdrawals during retirement. For multi-participant SEP IRAs, employers can claim a tax deduction for contributions they make to their employees SEP IRAs. SoFi doesn’t offer multi-participant SEP IRAs, however.

Can I cash out my SEP IRA?

Similar to other retirement plans, you can withdraw your contributions and earnings any time, but you may have to pay a tax penalty if you withdraw before age 59 ½.

Can I have a SEP IRA without employees?

Yes, you can have a SEP IRA without employees. In fact, SoFi only offers solo SEP IRAs.

SEP IRA - Simplified Employee Pension Plan

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