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.
Your contributions to a simplified employee pension IRA, 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).
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.