Driver Retirement: SEP IRA vs. One-Participant 401(k)

Start with the right compensation base

Contribution room begins with supported Schedule C net profit, not gross platform payouts and not a bank deposit. For a self-employed person, the deductible half of regular self-employment tax reduces the compensation base before the reduced employer rate is applied. W-2 Social Security wages can affect the shared wage-base calculation. The

retirement calculator shows the adjustment explicitly so a 25% shortcut is not mistaken for a final contribution.

Compare SEP IRA with one-participant 401(k)

A SEP generally models an employer contribution only. A one-participant 401(k) can combine an employee elective deferral with an employer contribution, subject to the annual additions limit and any deferrals already used in another plan. These are alternative scenarios in this site’s model; do not add the SEP maximum to the 401(k) maximum.

For 2026 the calculator keeps the $24,500 elective-deferral limit, the standard $8,000 catch-up, the higher $11,250 catch-up scenario for ages 60–63, and the $72,000 overall limit versioned in the data source.

Low profit and existing plans can control the result

A published limit is not an automatic contribution. If plan compensation is $0, the modeled contribution is $0. At low profit, total one-participant 401(k) contributions are capped by compensation even when elective-deferral room remains. Existing employee deferrals, a spouse’s plan coordination, W-2 wages, age, and catch-up selection can change the available room. Enter what you know and label what still needs review.

The Schedule C bridge helps establish the profit input before comparing scenarios.

Check eligibility and administration

Confirm whether the business has employees, whether the plan permits the intended contribution, the adoption and contribution deadlines, document requirements, and any coverage or nondiscrimination issue. A one-participant plan is not automatically available to every household. A provider or qualified tax professional can confirm the plan terms; the calculator cannot open, administer, or approve a retirement account.

Coordinate cash flow with tax planning

Gig take-home pay can show the cash-planning tradeoff before a contribution.

Keep a reserve for estimated taxes and ordinary operating costs before committing a contribution. A retirement contribution may have tax effects that depend on the return and plan; this guide does not claim that it reduces self-employment tax.

Keep a contribution record

Save the profit calculation, the SE-tax adjustment, the limit year, existing deferral records, age and catch-up assumption, provider documents, adoption date, contribution date, and confirmation of the amount actually deposited. Revisit the scenario when profit or W-2 wages change. Review the current IRS publications and plan document before acting on a limit headline.

Ask the provider the questions the calculator cannot answer

Before opening or funding a plan, ask whether the business has eligible employees, whether the plan permits a 60–63 catch-up, how existing W-2 deferrals are tracked, which document establishes the adoption date, and how employer contributions are calculated from the plan’s definition of compensation. Ask how corrections are handled and where contribution confirmations are stored. Bring the calculator’s assumptions and the source documents to that conversation rather than treating the modeled maximum as an instruction to deposit that amount.

Recheck the limit year before acting

Retirement limits are versioned by tax year. A 2026 result should stay tied to the 2026 data version even if a visitor opens the page in a later calendar year. When the site publishes a new year, compare the new source records, catch-up rules, and plan documentation before reusing an old screenshot or contribution note.

Official sources

• IRS 2026 inflation adjustments (Rev. Proc. 2025-32)
• IRS Topic 554: Self-employment tax
• IRS 2026 retirement limits and self-employed contribution guidance
• IRS 2026 SEP contribution limits
• IRS one-participant 401(k) contribution rules

See methodology for formulas, source status, assumptions, and known limits.