================================================================ FREELANCE RETIREMENT ACCOUNT COMPARISON GUIDE SoloStack — solostack.madethis.app ================================================================ Complete comparison of all 4 self-employed retirement accounts. 2024 and 2025 contribution limits included. Decision flowchart + account-opening checklist. ================================================================ PART 1: THE 4 ACCOUNTS — 8-DIMENSION COMPARISON ================================================================ DIMENSION 1: CONTRIBUTION LIMITS ───────────────────────────────── SEP-IRA 2024: Up to 25% of net self-employment income, max $66,000 2025: Up to 25% of net self-employment income, max $70,000 (projected) Note: Only employer-side contributions. No employee deferral. Solo 401(k) 2024: $23,000 employee + 25% employer, combined max $66,000 Age 50+ catch-up: additional $7,500 employee = $30,500 employee max 2025: $23,500 employee + 25% employer, combined max $70,000 (projected) Age 50+ catch-up: additional $7,500 = $31,000 employee max SIMPLE IRA 2024: $16,000 employee; employer must contribute 2–3% match Age 50+ catch-up: additional $3,500 = $19,500 max 2025: $16,500 employee (projected); same catch-up structure Traditional / Roth IRA 2024: $7,000 total; $8,000 if age 50+ 2025: $7,000 total; $8,000 if age 50+ (same, no adjustment expected) Note: Combined limit across Traditional and Roth — not per account. DIMENSION 2: ROTH OPTION ───────────────────────── SEP-IRA: NO — all contributions are pre-tax only Solo 401(k): YES — Roth Solo 401(k) allows after-tax contributions with tax-free growth and withdrawal SIMPLE IRA: NO — pre-tax only Traditional IRA: NO — pre-tax (deductible) Roth IRA: YES — after-tax contributions, tax-free growth DIMENSION 3: SETUP COMPLEXITY ─────────────────────────────── SEP-IRA: Complexity: VERY LOW Time: 15–20 minutes online Steps: Open account at brokerage + file IRS Form 5305-SEP Plan document: Not required (IRS provides standard agreement) Solo 401(k): Complexity: MODERATE Time: 30–60 minutes + plan document review Steps: Open account + adopt a written plan document Plan document: Required (brokerage provides) Annual filing: Form 5500-EZ required once balance exceeds $250,000 SIMPLE IRA: Complexity: LOW-MODERATE Time: 30–45 minutes Requirement: Must notify employees 60 days before plan year starts Annual notice: Required each year Traditional/Roth IRA: Complexity: VERY LOW Time: 10 minutes online No business documentation required DIMENSION 4: LOAN OPTION ────────────────────────── SEP-IRA: NO Solo 401(k): YES — borrow up to 50% of vested balance, max $50,000 Must repay within 5 years with interest SIMPLE IRA: NO Traditional IRA: NO Roth IRA: NO (contributions can be withdrawn penalty-free) DIMENSION 5: EARLY WITHDRAWAL PENALTY ─────────────────────────────────────── SEP-IRA: 10% penalty + income tax if withdrawn before age 59½ Solo 401(k): 10% penalty + income tax if withdrawn before age 59½ SIMPLE IRA: 25% penalty (not 10%) if withdrawn within 2 years of first contribution; 10% after 2-year period Traditional IRA: 10% penalty + income tax before age 59½ Roth IRA: Contributions (not earnings) can be withdrawn any time penalty-free; earnings subject to 10% before 59½ DIMENSION 6: REQUIRED MINIMUM DISTRIBUTIONS (RMD) ──────────────────────────────────────────────────── SEP-IRA: YES — starting at age 73 (SECURE 2.0 Act) Solo 401(k): YES for Traditional; NO for Roth Solo 401(k) SIMPLE IRA: YES — starting at age 73 Traditional IRA: YES — starting at age 73 Roth IRA: NO — no RMDs during owner's lifetime DIMENSION 7: BEST INCOME LEVEL ──────────────────────────────── SEP-IRA: Any income; most efficient under ~$50k net At $50k net: max contribution ~$11,545 Solo 401(k): Over $50k net; maximizes contributions at most levels At $50k net: ~$23,000 employee + ~$11,545 employer SIMPLE IRA: Any, but designed for small employers with employees Traditional/Roth: Any — use as a starting point or supplement DIMENSION 8: BEST FOR ────────────────────── SEP-IRA: → Solo freelancers with variable income who want simplicity → People who may open the account late (file deadline = fund deadline) → Freelancers who don't need a Roth option Solo 401(k): → High earners who want to maximize contributions → Freelancers who want a Roth option → People who understand they need to establish by Dec 31 SIMPLE IRA: → Freelancers who have 1–5 employees → Those comfortable with mandatory contribution requirements Traditional IRA: → Anyone supplementing a SEP/Solo 401(k) → Those who expect lower tax rates in retirement (pre-tax makes sense) Roth IRA: → Starting point for any freelancer → Low-to-moderate earners who expect higher rates in the future → Anyone who wants tax-free retirement income ================================================================ PART 2: DECISION FLOWCHART (5 Questions → Recommended Account) ================================================================ QUESTION 1: Do you have any W-2 employees (other than a spouse)? YES → SIMPLE IRA (you're required to match contributions) NO → Continue to Q2 QUESTION 2: Are you just starting out with retirement savings? YES → Start with a Roth IRA ($7,000/year) Then add a SEP-IRA or Solo 401(k) as income grows NO → Continue to Q3 QUESTION 3: Is your net self-employment income under $50,000/year? YES → SEP-IRA (simpler, contribution limits are adequate at this level) NO → Continue to Q4 QUESTION 4: Do you want a Roth (after-tax, tax-free growth) option? YES → Solo 401(k) with Roth election NO → Continue to Q5 QUESTION 5: Do you prioritize simplicity over maximizing contributions? YES → SEP-IRA (open by tax filing deadline, minimal paperwork) NO → Solo 401(k) (more paperwork, but higher contribution potential) RESULT SUMMARY: Employees present → SIMPLE IRA Just starting out → Roth IRA first Under $50k, want simple → SEP-IRA Want Roth + high limit → Solo 401(k) Roth Over $50k, max focus → Solo 401(k) Traditional Under $50k, deadline-late → SEP-IRA (can fund up to filing deadline) ================================================================ PART 3: ACCOUNT-OPENING CHECKLIST ================================================================ WHAT YOU NEED FOR ANY ACCOUNT ───────────────────────────── □ Social Security Number (SSN) or Employer Identification Number (EIN) □ Net self-employment income estimate for the current year □ Bank account for linking (routing + account number) □ Brokerage account (Fidelity, Vanguard, or Schwab — all free, no minimums) □ Government-issued ID (driver's license or passport) OPENING A SEP-IRA ────────────────── □ Choose brokerage: Fidelity / Vanguard / Schwab □ Open "SEP-IRA" account (takes 15–20 minutes online) □ Review and sign IRS Form 5305-SEP (brokerage provides) □ Fund the account before tax filing deadline (April 15 or extension) □ Calculate contribution: Net Profit × 0.9235 × 0.25 = max □ Select investments (index funds recommended: total market, S&P 500) □ Note deadline: You can open AND fund after Dec 31 — up to tax deadline OPENING A SOLO 401(k) ────────────────────── □ Choose brokerage: Fidelity / Vanguard / Schwab / TD Ameritrade □ Open "Individual 401(k)" or "Solo 401(k)" account □ Review and adopt the plan document (brokerage provides) □ Elect Roth vs. Traditional (or both — you can split contributions) □ Establish the account by DECEMBER 31 of the tax year □ Fund employee deferral portion by Dec 31 □ Fund employer contribution portion by tax filing deadline □ Set calendar reminder for Form 5500-EZ once balance passes $250k OPENING A SIMPLE IRA ───────────────────── □ Choose brokerage (Fidelity offers SIMPLE IRAs) □ Establish plan by October 1 of the year (or ASAP for new businesses) □ Notify all eligible employees at least 60 days before plan year starts □ Complete IRS Form 5304-SIMPLE or 5305-SIMPLE □ Understand the 2-year rule: 25% penalty on early withdrawal in first 2 yrs □ Budget for mandatory employer match (2% non-elective or 3% matching) OPENING A ROTH / TRADITIONAL IRA ────────────────────────────────── □ Choose brokerage: Fidelity / Vanguard / Schwab □ Open IRA account (Roth or Traditional — you can have both) □ Verify income limits (Roth IRA phases out at $146k–$161k single, 2024) □ Contribute up to $7,000 ($8,000 if 50+) per year □ Fund by April 15 tax deadline (no extensions for IRA contributions) □ Select index fund investments ================================================================ 2024 LIMITS QUICK REFERENCE ================================================================ Account Employee Max Employer Max Combined Max Catch-Up (50+) ───────────────────────────────────────────────────────────────────────────── SEP-IRA N/A $66,000 $66,000 None Solo 401(k) $23,000 ~$43,000 $66,000 +$7,500 SIMPLE IRA $16,000 3% of salary N/A +$3,500 Roth/Trad IRA $7,000 N/A $7,000 +$1,000 ================================================================ NOTES ================================================================ • All figures based on 2024 IRS limits. 2025 limits subject to IRS cost-of-living adjustments (typically announced in October/November). • SEP-IRA employer contribution formula: Net Profit × 0.9235 × 0.25 The 0.9235 factor adjusts for the deductible half of SE tax. • Solo 401(k) employer portion uses the same formula. Employee deferral: up to $23,000 or 100% of net SE income, whichever is less. • Always verify current limits at IRS.gov/retirement-plans before filing. • This guide is for educational purposes. Consult a CPA or financial advisor for guidance specific to your situation. ================================================================ From SoloStack — Free resources for freelancers and solopreneurs solostack.madethis.app/resources ================================================================