---
title: 'SEP-IRA vs. 401(k): What's best for a sole proprietor'
description: I'm a sole proprietor. Should I convert my SEP-IRA to a solo 401(k)? -- Jeff, Mendota Heights, Minn. That depends mostly on how much you…
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![SEP-IRA vs. 401(k): What's best for a sole proprietor](https://money.com/img/logo-social.png)

*I'm a sole proprietor. Should I convert my SEP-IRA to a solo 401(k)? -- Jeff, Mendota Heights, Minn.*

That depends mostly on how much you make and how much you want to save.

Is your self-employment income less than roughly a quarter million? You can probably put more into the solo 401(k) -- a retirement plan for a one-person business -- says Adam Bergman, a tax attorney at IRA Financial Group in New York City.

[Related: Tips for retirement planning](http://money.cnn.com/magazines/moneymag/money101/lesson13/index.htm)

Your contributions to a [simplified employee pension IRA](http://money.cnn.com/retirement/guide/selfemployment_sep_ira.moneymag/index.htm), also used at small firms, are capped at 20% of income after a reduction for self-employment taxes; with a solo 401(k), you can sock away up to $17,500 more. Either way, your 2013 limit is $51,000 or, if you're 50 or older, $56,500 in a solo 401(k).

[Related: Trick yourself into boosting 401(k) contributions](http://money.cnn.com/2013/08/01/retirement/401k-contributions.moneymag/index.html)

Higher limits aren't the only perk of a solo 401(k): You can also use it to make Roth 401(k) deferrals of after-tax money that you can withdraw tax-free in retirement.

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