Roth IRA vs SEP IRA vs Solo 401k for S Corp

Two happily retired S Works customers

Choosing among the many retirement plans for s corp owners is simpler once you understand how each plan works and who it serves best. Below you’ll find a side‑by‑side look at the major s corp retirement plans, including contribution limits, administrative effort, and employee impact, so you can quickly spot the right fit for your consultancy.

1. Traditional IRA & Roth IRA for an S Corp

The low‑maintenance starter option

Snapshot	Details
Who it’s for	New or part‑time S‑Corp consultants who want maximum flexibility with minimal paperwork
2025 contribution cap	$7,000 (<50) / $8,000 (50+)
How it’s funded	Personal checks or transfers—reported as s corp retirement contributions at tax time
Pros	Near‑zero setup, broad investment menus, tax deduction (Traditional) or tax‑free growth (Roth)
Cons	Lowest limits and income‑phase‑outs for Roth

2. SEP‑IRA for an S Corp

A simple s corp profit sharing plan for solo or very small teams

Snapshot	Details
Who it’s for	One‑owner S‑Corps or firms with a handful of employees and variable profits
2025 contribution cap	Up to 25 % of W‑2 pay, max $71,000
How it’s funded	Employer‑only, discretionary each year
Pros	Easy to open at any brokerage, contributions can vary with profits, no annual 5500 filing
Cons	Must give the same percentage to every eligible employee—cost rises as you hire

3. Solo 401(k)

Maximum savings for a business of one (or one + spouse)

Snapshot	Details
Who it’s for	High‑earning owners with zero employees
2025 contribution cap	Employee deferral $23,500 ($30,500 age 50+)Employer 25 % of W‑2Combined $71,000 ($77,500 age 50+)
How it’s funded	Mix of employee salary deferral and employer profit‑sharing
Pros	Highest potential deposit, Roth deferral option, loans allowed at many custodians
Cons	Must file Form 5500 once assets > $250k; slightly more admin than IRAs

4. Safe Harbor 401(k)

The go‑to when you have staff but still want to max out

Snapshot	Details
Who it’s for	S‑Corps with employees who need an automatic pass on IRS nondiscrimination tests
2025 contribution cap	Same overall limits as Solo 401(k)
How it’s funded	Employee deferrals plus mandatory match — either 4 % dollar‑for‑dollar or 3 % non‑elective
Pros	Lets owners contribute the max regardless of employee participation; optional profit‑sharing layer
Cons	Higher record‑keeping fees; match is required every year

5. SIMPLE IRA

Streamlined plan for small teams when cost control matters

Snapshot	Details
Who it’s for	Firms with ≤ 100 employees seeking lower fees than a 401(k)
2025 contribution cap	$16,000 deferral ($19,500 age 50+)
How it’s funded	Employee deferrals plus either 2 % non‑elective or 1‑3 % match
Pros	One‑page plan document, no 5500 filing
Cons	Lower limits than SEP or 401(k); fixed match even in lean years

Putting It All Together

Plan	Max 2025 Contribution	Administrative Burden	Best Fit
Traditional/Roth IRA	$7–8 k	★	Beginners, side‑gigs
SEP‑IRA	25 % W‑2 up to $71 k	★★	One‑owner S‑Corps, variable profit
Solo 401(k)	$71 k ($77.5 k 50+)	★★☆	Highest earners, no staff
Safe Harbor 401(k)	$71 k ($77.5 k 50+)	★★★	Owners with employees
SIMPLE IRA	$16–19.5 k	★	Small teams, ultra‑low cost

Which Plan Is “Best”?

• The best retirement plan for s corp owners earning modest six figures with no staff is often the SEP‑IRA—high limits with almost no red tape.

• The best retirement plan for s‑corp owners looking to max out savings north of $60 k is typically the Solo 401(k) because of its dual deferral + profit‑sharing structure.

• Once you hire employees, compare a Safe Harbor 401(k) against a SIMPLE IRA to find the sweet spot between generosity and cost.

  
  

Next Steps with sworks (a.k.a. sworks‑io)

Selecting among the many s corp owner retirement plan options doesn’t have to slow you down. S Works sets up the plan, automates payroll deductions, and tracks every deposit so your s corp retirement plan options line up perfectly with quarterly cash flow and year‑end tax strategy.

Ready to lock in the right plan and super‑charge your future? Let’s talk.