If you own a C or S corporation and are the only employee, setting up a retirement plan is one of the smartest tax-saving moves you can make. Not only does it help you build long-term wealth, but it also allows your corporation to deduct contributions, reducing taxable income.
The good news? Even now in 2025, you can establish a plan that benefits you for your 2024 tax year. Below, we’ll explore the best retirement plan options available to solo-owned corporations.
1. SEP-IRA: The Simple and Flexible Option
A Simplified Employee Pension (SEP-IRA) is one of the easiest retirement plans to establish for a single-employee corporation. Your corporation can contribute up to 25% of your W-2 salary into a tax-advantaged retirement account.
Contribution Limits
✅ 2024 max contribution: $69,000
✅ 2025 max contribution: $70,000
Pros of a SEP-IRA
✅ Simple to set up – Establish one in minutes using Form 5305-SEP.
✅ Flexible contributions – You can contribute up to the max or nothing depending on cash flow.
✅ No annual filings – No IRS reporting required for a one-person SEP.
✅ Extended contribution deadline – Your corporation can contribute up until the extended tax return due date (October 15, 2025, for the 2024 tax year).
Example
If your corporation pays you a $276,000 salary in 2024, it can contribute the full $69,000 (25% of salary).
Cons of a SEP-IRA
🚫 Lower contribution potential than a solo 401(k) for lower salaries.
🚫 No loan options – Unlike some plans, you cannot borrow from a SEP-IRA.
Best for:
If you want the simplest retirement plan with no administrative hassle, a SEP-IRA is a great choice.
2. Defined Contribution Profit-Sharing Plan: Similar to a SEP, With Loan Options
A defined contribution profit-sharing plan allows your corporation to make tax-deductible contributions of up to 25% of your salary, just like a SEP-IRA.
Contribution Limits
✅ 2024 max contribution: $69,000
✅ 2025 max contribution: $70,000
Pros of a Profit-Sharing Plan
✅ Same high contribution limits as a SEP.
✅ Flexible contributions – You can contribute up to the max or nothing.
✅ Extended deadline – Contributions can be made up until your corporation’s tax return due date.
✅ Loan option available – You may be able to borrow up to $50,000 from the account.
Cons of a Profit-Sharing Plan
🚫 IRS reporting required if your account balance exceeds $250,000 (you must file Form 5500-EZ).
🚫 No additional contribution advantages over a SEP unless you need a loan option.
Best for:
If you want SEP-like benefits but with loan options, this plan might be a better fit.
3. SIMPLE IRA: Best for Lower-Income Corporations
A Savings Incentive Match Plan for Employees (SIMPLE IRA) is ideal if your corporation pays you a modest salary and you want to maximize contributions at lower income levels.
Contribution Limits for 2025
✅ Employee salary deferral: Up to $16,500
✅ Employer match: Up to 3% of salary
✅ Total max contribution: $17,400 (if salary = $30,000)
Catch-Up Contributions
✅ Age 50+: Additional $3,500 (total = $20,000)
✅ Ages 60-63: Additional $5,250 (total = $21,750)
Example
If you earn $30,000 in salary, you can:
- Defer $16,500 from your paycheck into your SIMPLE IRA.
- Your corporation contributes a 3% match ($900).
- Total contribution: $17,400 (more than the $7,500 max under a SEP).
Pros of a SIMPLE IRA
✅ Great for modest salaries – Allows larger contributions relative to salary than a SEP.
✅ Easy to set up – No annual IRS filings required.
✅ Employer contributions lower corporate taxes.
Cons of a SIMPLE IRA
🚫 Must be set up by October 1 of the tax year. (Too late for 2024, but still an option for 2025.)
🚫 Lower contribution limits than a solo 401(k) for higher salaries.
🚫 No loan options.
Best for:
If your corporation pays you a lower salary, a SIMPLE IRA may be the best way to maximize contributions.
4. Solo 401(k): The Most Powerful Retirement Plan
A solo 401(k) allows both:
- Elective deferral contributions (from your salary)
- Employer contributions (from your corporation)
Contribution Limits for 2025
✅ Elective deferral: Up to $23,500 (reduces taxable salary).
✅ Employer contribution: Up to 25% of salary.
✅ Total max contribution: $70,000.
Catch-Up Contributions
✅ Age 50+: Additional $7,500 (total max = $77,500).
✅ Ages 60-63: Additional $11,250 (total max = $81,250).
Example
If your 2025 salary is $120,000, your total solo 401(k) contribution could be $53,500:
- Elective deferral: $23,500
- Employer contribution: $30,000 (25% × $120,000)
If you’re 50+, your max jumps to $61,000!
Pros of a Solo 401(k)
✅ Highest contribution potential – Especially great if age 50+.
✅ Loan option available – Borrow up to $50,000.
✅ Flexibility – Contribute more in good years, less in bad years.
Cons of a Solo 401(k)
🚫 More complex setup – Requires plan documents and administration.
🚫 Annual IRS filing required once assets exceed $250,000.
🚫 Must be set up by December 31 (for the tax year in which contributions apply).
Best for:
If you want to contribute the most possible, especially if age 50+, a solo 401(k) is usually the best option.
Which Retirement Plan Is Best for You?
| Plan | Best for… | Max 2025 Contribution | Loan Option? | IRS Filing Required? |
|---|---|---|---|---|
| SEP-IRA | Simplicity & high income | $70,000 | ❌ No | ❌ No |
| Profit-Sharing | Same as SEP, but with loans | $70,000 | ✅ Yes | ✅ If > $250K |
| SIMPLE IRA | Modest salary earners | $21,750 (with catch-up) | ❌ No | ❌ No |
| Solo 401(k) | Max savings potential | $81,250 (with catch-up) | ✅ Yes | ✅ If > $250K |
Final Takeaways
✅ Want the simplest plan? → Choose a SEP-IRA.
✅ Have a modest salary? → A SIMPLE IRA may work best.
✅ Want the highest contribution limits? → Go with a Solo 401(k).
✅ Need to borrow from the account? → A Solo 401(k) or Profit-Sharing Plan is best.
No matter which plan you choose, setting one up can reduce your tax burden and help secure your financial future!
