Retirement Plan Calculator for Business Owners
As a business owner, you have access to retirement plans that W-2 employees don't: Solo 401(k), SEP-IRA, and defined-benefit Cash Balance plans. The right combination can shelter $100K–$300K+ per year from taxes depending on your age and income. This calculator shows your maximum contribution under each plan — and what stacking them saves.
How each plan works
SEP-IRA — simple, but limited
A Simplified Employee Pension is the easiest retirement plan to set up: no plan documents, no annual filings. You contribute up to 25% of W-2 compensation (or ~20% of net SE income) up to $72,000 in 2026. Deductible as a business expense.
Downside: no employee-side deferral (so at lower incomes, Solo 401(k) goes further), no Roth option, no loans, and if you have employees you must contribute the same percentage for them.
Solo 401(k) — usually better than SEP for owner-only businesses
If you have no full-time employees other than a spouse, you can use a Solo 401(k). You wear two hats:
- Employee deferral: Up to $24,500 in 2026 ($32,500 if age 50–59 or 64+; $35,750 if age 60–63 — SECURE 2.0 super catch-up). Can be Roth.
- Employer profit-sharing: Up to 25% of W-2 salary (S-corp) or ~20% of net SE income, subject to the total $72,000 415(c) limit ($80,000 / $83,250 with catch-up).
At incomes below ~$125K, Solo 401(k) beats SEP-IRA because the employee deferral fills the gap. At higher incomes both max out at the 415(c) ceiling.
Cash Balance Plan — the big lever for high earners 45+
A Cash Balance plan is a type of defined benefit plan. An actuary calculates an annual contribution needed to fund a projected retirement benefit. Because contributions are age-weighted — you're funding a lump sum by retirement — a 55-year-old can contribute far more than a 35-year-old.
The 2026 DB plan maximum annual benefit is $290,000 (IRS Notice 2025-67). For a 55-year-old aiming to reach that limit, the required annual contribution can be $225,000–$250,000. That's on top of a Solo 401(k). At a 37% marginal rate, that's $83K–$92K of tax deferred for just the CB contribution alone.
- Business owner netting $500K+ annually who has maxed Solo 401(k)
- Age 45+: contribution limit is large enough to justify the setup and actuary cost (~$2,000–$3,000/yr)
- Planning to maintain high income for 5+ years (DB plans require consistent contributions)
- S-corp or partnership — can also cover certain key employees if desired
Stacking: Solo 401(k) + Cash Balance
Since EGTRRA 2001, the 415(e) combined-plan limitation was repealed. That means you can maximize both a Solo 401(k) and a Cash Balance plan independently in the same year. A 52-year-old netting $700K might shelter:
| Plan | Contribution | Federal tax saved (37%) |
|---|---|---|
| Solo 401(k) — total | $80,000 | $29,600 |
| Cash Balance plan | $195,000 | $72,150 |
| Backdoor Roth IRA (×2) | $15,000 | $0 (Roth — tax-free growth) |
| Combined | $290,000 | $101,750 |
That's roughly $100K of federal tax avoided in a single year — compounding in a tax-deferred account rather than going to the IRS.
SEP-IRA vs Solo 401(k): which wins?
| SEP-IRA | Solo 401(k) | |
|---|---|---|
| 2026 max contribution | $72,000 | $72,000 (base) / $83,250 (age 60–63) |
| Roth option | No | Yes |
| Catch-up contributions | No | Yes ($8,000 or $11,250 at 60–63) |
| Loans | No | Yes (up to 50% of balance / $50K) |
| Good at lower incomes (<$125K) | No — employee deferral advantage lost | Yes |
| Employees allowed | Yes (must contribute equally) | No (owner + spouse only) |
| Admin complexity | Low | Low–Medium (Form 5500-EZ once balance >$250K) |
For most owner-only businesses, Solo 401(k) dominates. The only time SEP wins is if you have employees you want to include, or you want dead-simple admin and are already at high enough income that both plans hit the same ceiling.
Common mistakes
- Staying on SEP-IRA when you should have switched to Solo 401(k). If you're under ~$100K net income, SEP limits you more — you're missing the employee-deferral portion.
- Not knowing Cash Balance exists. Most CPAs aren't proactively modeling it. If you're 48+ and netting over $500K, ask specifically.
- Missing the super catch-up window. Ages 60–63 get a one-time $11,250 catch-up (vs. normal $8,000 catch-up). Use it.
- Contributing too late in the year. Solo 401(k) employee deferrals must be made by December 31. Profit-sharing can be made by the tax filing deadline.
- Not opening a Solo 401(k) by year-end. The plan must be established by December 31 to contribute for that year (even if you fund it later).
Related
Model your specific plan combination
An advisor who specializes in business-owner planning will model the Solo 401(k) + Cash Balance combination for your income, age, and entity structure — and tell you exactly what it saves. Free match, no obligation.