Irregular Income Retirement Calculator

Solo 401(k) employer contribution uses IRS Pub 560 self-employed rate (20% of net less SE deduction). 2026 SS wage base $184,500 (SSA.gov). Annual additions limit $72,000 under-50 / $80,000 ages 50+ / $83,250 ages 60–63 (IRS Notice 25-67). SEP IRA max $72,000 (IRS Notice 25-67). Tax savings are estimates only — actual savings depend on your full tax picture.

The single most important difference for variable-income earners

Solo 401(k) employee deferrals must be elected by December 31 of the tax year. If you haven't set up a plan and designated the deferral amount before year-end, you've permanently lost the ability to make that election for that year. You can still make the employer (profit-sharing) contribution up to your tax filing deadline — but the deferral, which is often the larger piece, is gone.

SEP IRA has no year-end deadline. You can open a SEP IRA and make the full contribution for a tax year as late as the extended filing deadline — October 15 of the following year. For a consultant who doesn't know their final revenue until Q1, this is a meaningful advantage: you decide how much to put in after you know the number.

Solo 401(k) vs SEP IRA at different income levels (2026, under age 50)

Employer contribution computed as 20% × (net − SE deduction). Annual additions limit $72,000 (under 50). At $380K+, both plans hit the $72,000 cap and the advantage disappears.

The bad year playbook

If net income drops from $300K to $100K, here's what each plan allows you to do:

If you have a solo 401(k)

• Employee deferral: You can contribute as little as $0 — there's no mandatory minimum. If cash is tight, defer nothing and just do the employer contribution.
• Employer contribution: Also voluntary. You can skip it entirely or contribute the exact formula amount. Calculate at year-end and contribute before the filing deadline.
• Plan stays open: A bad year doesn't require you to terminate the plan. Leave it open and contribute more next year.
• What you can't undo: If you pre-committed a deferral amount in a salary reduction agreement and your income dropped, you may need to adjust mid-year (most custodians allow this). Make sure your plan documents permit mid-year changes.

If you have a SEP IRA

• Zero is fine: SEP IRA contributions are entirely discretionary. A year with low or no income means you simply don't contribute — there's no penalty and the account remains open.
• Proportional calculation: The 20% formula means contributions automatically scale with income. At $100K net, you can contribute ~$18,230. At $60K, ~$10,640. No complex election needed.
• Timing advantage matters most here: You can wait until Q1 of the following year, after your taxes are prepared, to make the contribution. This lets you optimize the exact amount for your tax picture.

Cash balance plan — important warning for variable income

If you've stacked a cash balance plan on top of a solo 401(k), be careful: cash balance plans have actuarially required minimum contributions. In a bad year, you may still owe the actuary's calculated minimum, even if business revenue is down sharply. This is one reason cash balance plans are better suited to businesses with consistent high income rather than volatile freelance revenue. See the cash balance plan guide for details on when stacking makes sense.

The good year playbook

Revenue spikes create a window to accelerate retirement savings and shelter a larger-than-usual portion from income tax. Maximizing this requires knowing which plan to pull which lever.

Solo 401(k) — the levers

1. Max the employee deferral first: $24,500 ($32,500 age 50–59 and 64+; $35,750 age 60–63). This is dollar-for-dollar deductible and comes out of your W-2 or owner compensation with no formula.
2. Add the employer profit-sharing contribution: Up to 20% of net-minus-SE-deduction, not to exceed the annual additions limit ($72,000 total / $80,000 age 50+ / $83,250 age 60–63).
3. Consider stacking a cash balance plan if income is consistently high (see below).

SEP IRA — the lever

SEP IRA has only one lever: the 20% employer contribution, capped at $72,000. In a very good year above ~$380K net, this maxes out and a solo 401(k) would have served you better (the deferral room above the SEP's effective rate isn't available).

When to add a cash balance plan in a good year

If you're over 45 and have a great year at $350K+ net, a defined benefit / cash balance plan on top of a solo 401(k) can generate an additional $100K–$330K in deductions depending on age. The downside: the plan costs $4K–$9K/year to administer and requires consistent income to sustain. Read our cash balance plan guide before committing.

Which plan is right for your income pattern?

SEP-to-solo 401(k) rollover — switching plans mid-career

One of the most common questions from self-employed professionals who started with a SEP IRA and later grew their income: can I roll my SEP IRA balance into a solo 401(k)?

Yes. Solo 401(k) plans that allow incoming rollovers (most custodians do) will accept a SEP IRA rollover. The process is typically a direct rollover — the SEP IRA is transferred to the solo 401(k) as a pre-tax rollover contribution. Benefits of doing this:

• Pro-rata rule protection: Once your SEP IRA balance is inside a 401(k), it doesn't count in the pro-rata calculation for backdoor Roth conversions. If you want to do a backdoor Roth, this rollover is often a prerequisite.
• Creditor protection: ERISA-qualified plans (like solo 401(k)) have stronger federal creditor protection than IRAs in some states.
• Consolidation: Simpler to manage one account than two.

Note: the solo 401(k) must be established and have a balance before you can roll the SEP into it. You can't roll into a plan document with no other activity if you're trying to eliminate the SEP IRA pro-rata issue for a current-year backdoor Roth.

SIMPLE IRA — when it comes up

SIMPLE IRA has an employee contribution limit of $17,000 for 2026¹ — lower than the solo 401(k) deferral — and requires an employer match (typically 3% of compensation). For a solo self-employed person with no employees, SIMPLE is rarely the optimal choice. Where it makes sense: small businesses with 1–100 W-2 employees where the employer doesn't want the administrative complexity of a full 401(k) plan. If you have employees, SIMPLE IRA deserves a look; if you're solo, it doesn't.