Solo 401(k) Plan

Alternatively known as a Solo-k, Uni-k and One-participant k, the Solo 401(k) plan is designed for a business owner and his or her spouse.

Because the business owner is both the employer and employee, elective deferrals of up to $19,500 can be made, plus a non-elective contribution of up to 25 percent of compensation up to a total annual contribution of $57,000 for incorporated businesses, not including catch-up contributions. The limit for unincorporated businesses is 20 percent, says Littell.

Pros: “If you don’t have other employees, a solo is better than a SIMPLE IRA because you can contribute more to it,” says Littell. “The SEP is a little easier to set up and to terminate. So if you don’t want to contribute more than 20 percent of your earnings, I would set up a SEP.” However, if you want to set up your plan as a Roth, you can’t do it in a SEP, but you can with a Solo-k.

Cons: It’s a bit more complicated to set up, and once assets exceed $250,000, you’ll have to file an annual report on Form 5500-SE.

What it means to you: If you have plans to expand and hire employees, this plan won’t work. Once you hire other workers, the IRS mandates that they must be included in the plan if they meet eligibility requirements, and the plan will be subject to non-discrimination testing.