Can I Contribute to a SEP IRA and Solo 401k at the Same Time?

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One of the most common questions business owners ask when setting up a retirement plan is: Can I contribute to both a SEP IRA and a Solo 401k, and will this increase my total contribution per year?

The short answer: Yes — but only in certain cases. If you have two separate businesses, you can contribute to both and get two independent contribution limits. That means you could potentially max out your Solo 401k and SEP IRA contribution limits in the same year, which could significantly increase your retirement savings potential. 

But if you only have one business, things work differently. Your ability to contribute to both depends on how your SEP IRA was set up and whether your contributions are tied to the same income source.

Let’s break it down so you can see exactly how this works.

It Depends on How Your SEP IRA Was Set Up

The key detail here is how your SEP IRA was established. If it was set up using IRS Form 5305, then you cannot also have a Solo 401k. That’s because Form 5305 prohibits contributing to another qualified plan at the same time.

If your SEP IRA was NOT set up with Form 5305, you can have both plans—but the rules change depending on whether they’re under the same business or two separate businesses.

So how do you get around this restriction? Your plan provider must use a prototype SEP document instead of Form 5305. This is essentially a modified version that allows for multiple retirement plans.

📝 Important Note: If you already have a Solo 401k, you cannot later establish a SEP IRA using Form 5305. The restriction works both ways.

If You Have One Business

If you’re running one business and want to contribute to both a Solo 401k and a SEP IRA, your total contributions are combined and must not exceed:

If you’re over 50, you can make catch-up contributions to your Solo 401k. But there’s a catch — you must first max out your employee contribution of $23,000 in 2024 and $23,500 in 2025.

✏️ Example: 

If you’re under 50 in 2025, your total contribution limit is $70,000. Let’s say you put $24,000 into your Solo 401k—that leaves you with $46,000 left for your SEP IRA.

Disclosure: The above example is for illustrative purposes only and is not representative of any specific client situation or investment outcome. Contribution limits and tax rules can vary.

Is there a benefit to having both?

For individuals with a single business, there may be limited additional benefit to having both a Solo 401k and a SEP IRA as the total contribution limit is shared. However, a Solo 401k often provides more flexibility and benefits as discussed below: 

✅ It offers more tax benefits

✅ You can choose a Roth option for tax-free growth

✅ You can invest in any asset classes

📌 Also read: Solo 401k Tax Advantages & Benefits

If You Have Two Separate Businesses

If you own two separate businesses, you might consider having both a Solo 401k and a SEP IRA. This could be a strategy worth exploring, but only if your businesses are truly separate — one with employees and the other without. 

If your SEP IRA is NOT set up with IRS Form 5305, you can establish both plans and take advantage of separate contribution limits for each business. Since they’re considered independent employers, you essentially double your contribution room.

So, how much can you contribute?

For 2024, you could contribute:

📝 Total: $138,000 if under 50 | $153,000 if 50+

For 2025, you could contribute:

📝 Total: $140,000 if under 50 | $155,000 if 50+

Solo 401k and SEP IRA Contribution Limits

Let’s go through a refresher on contribution limits for the Solo 401k and SEP IRA.

The Solo 401k and SEP IRA have the same contribution limits. However, only a Solo 401k has catch up contributions for those who are over 50 years of age.

Contribution rules are also different for the Solo 401k and SEP IRA. With a Solo 401k, you contribute as both the employer and employee. With a SEP IRA, you can only contribute as an employer.

Solo 401k Contribution Limits

✅ $69,000 for 2024

✅ $70,000 for 2025

✅ Solo 401k contribution limits with catch up contributions:

How contributions work:

✅ Employees can contribute up to $23,000 ($30,500 if age 50+) for 2024 and up to $23,500 ($31,000 if age 50+) for 2025.

✅ Employers can contribute up to 25% of their compensation (around 20% of net earnings if not incorporated).

✅ Total contributions for both sides must not exceed the yearly contribution limit.

SEP IRA Contribution Limits

✅ $69,000 for 2024

✅ $70,000 for 2025

✅ Employers can contribute up to 25% of compensation (20% if not incorporated) up to the yearly contribution limit.

❌ No catch up contributions for those who are 50+ in age

📌 Also read: SEP IRA vs Solo 401k

Disclosure: Contribution limits are subject to change. Please refer to the latest IRS guidelines for official information.

Wrapping It Up

Whether you choose a Solo 401k, a SEP IRA, or both depends on your business setup and retirement goals.

✅ One business? A Solo 401k offers more flexibility, higher potential contributions, and a Roth option. No real advantage in having both plans.

✅ Two businesses? You can contribute to both and double your retirement savings—as long as they’re separate entities and your SEP IRA isn’t set up with IRS Form 5305.

Next step: Review your business structure, income, and retirement strategy. If you’re unsure, consult a tax professional or financial advisor to make sure you’re maximizing your contributions the right way.

Disclaimer

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