Best solo 401k and SEP IRA providers for freelancers: a real comparison

The short answer: Etrade offers the best solo 401k for most freelancers, Vanguard wins for pure low-cost SEP IRA index investing, and Fidelity is the choice if you need brokerage flexibility. Fees are close to zero at all three, but the real difference is in contribution limits and account rules.

My accountant sent me a screenshot last February. It was a text exchange with another client, a graphic designer in Brooklyn, who had just opened a SEP IRA at a big bank. “It is free to open,” she had written. She missed the part where the fund expense ratios were 0.75%, or that she could not contribute as much as a solo 401k would have let her. By the time I saw it, she had already funded it for the year. Fixing it would have meant a complicated rollover and a conversation she did not want to have.

That moment stuck with me because it is so common. Freelancers are told to “pay yourself first,” which is great advice, but most articles skip the part where the account you pick determines how much you can actually shelter from taxes. A traditional IRA caps you at $7,000. A SEP IRA lets you contribute up to 25% of your net self-employment earnings. A solo 401k lets you do the employer portion (25%) plus an employee deferral ($23,000 as of 2025). That can be a massive difference.

I spent a weekend comparing the major providers, reading IRS publications, and calling brokerage support lines pretending to be a confused new freelancer. (I was only pretending to be confused. The hold music was real.) This is what I found.

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The SEP IRA vs solo 401k decision, explained simply

A SEP IRA is dead simple: you can contribute up to 25% of your net self-employment income, capped at $69,000 for 2025. Almost any brokerage offers one, and there are no annual filing requirements unless you run a SEP attached to a 401k. The downside: if you ever hire even one employee, you have to contribute the same percentage for them that you do for yourself. That can get expensive fast, which is why some people skip SEPs and go straight to solo 401ks.

A solo 401k (also called a one-participant 401k) is more flexible. You get the employer contribution (same 25% rule) and you get to make elective deferrals as the employee ($23,000, or $30,500 if you are 50+). You can also choose a Roth option for the employee portion, which is not available in a SEP IRA. The tradeoff: once your plan assets exceed $250,000, you need to file Form 5500-EZ annually. It is an extra step anyway.

Here is the math that matters. Imagine you net $80,000 in freelance income after expenses.

With a SEP IRA, you can contribute 25% of that, or $20,000.

With a solo 401k, you can contribute the same $20,000 employer portion plus the $23,000 employee deferral, for a total of $43,000. That is more than double the tax-advantaged savings.

At a 24% marginal tax rate, the solo 401k saves you roughly $5,520 more in taxes that year. Over ten years, assuming modest growth, that gap widens into tens of thousands of dollars. The account you pick on day one has compound consequences.

Etrade solo 401k: the pick for active traders and Roth lovers

I opened an Etrade solo 401k in 2023 after outgrowing my Vanguard SEP IRA. The account cost nothing to open. There are no maintenance fees. Stock and ETF trades are commission-free, which matters because I keep most of my retirement money in broad index ETFs and rebalance once a year.

The standout feature is the Roth option for employee deferrals. Most SEP IRAs are strictly pre-tax. With Etrade, I can choose to put my $23,000 employee deferral into a Roth bucket, meaning I pay taxes now and withdraw tax-free in retirement. This is useful during lean years when my freelance income drops and my marginal tax rate is lower. In flush years, I switch the deferral back to pre-tax. That flexibility does not exist in a SEP.

Etrade also allows in-service rollovers and loans against the plan, though I have not used either. The brokerage window is wide open. You can buy individual stocks, bonds, thousands of mutual funds, and Vanguard ETFs through their ticker symbols. I hold VTI (Total Stock Market), VXUS (International), and BND (Total Bond) in mine. The expense ratios on those ETFs are 0.03%, 0.08%, and 0.03% respectively.

The honest downside: Etrade does not offer the Roth option on the employer contribution. The IRS mandates that employer contributions must be pre-tax. Etrade simply follows that rule. The employee deferral Roth option is the only Roth piece available, so if you want to put your full $43,000 into Roth, you cannot. You also have to file Form 5500-EZ once your balance hits $250,000. Etrade sends reminders, but it is still your responsibility. And while their phone support is decent, their online dashboard for retirement accounts feels slightly dated compared to their active trading interface.

If you want to do something more active with a portion of your retirement money, say, keep 80% in boring index ETFs and use 20% for stock picks, Etrade is the best place to do that inside a tax-sheltered account. Just do not get cute with it. I know one designer who tried to day trade inside his solo 401k. He made $800 in January and lost $2,400 by March. The account still worked for his long-term holdings, but watching that swing every morning was not worth the cortisol.

Vanguard SEP IRA: the pick for hands-off index fund investors

If you want the absolute lowest costs and you do not need the higher contribution limits of a solo 401k, a Vanguard SEP IRA is hard to beat. The account itself costs nothing to open or maintain. You get access to Admiral Shares versions of Vanguard’s total market and target-date funds, which run as low as 0.03% per year. On a $50,000 balance, that is $15 in annual fees. Compare that to a managed account from a full-service brokerage that might charge 1% ($500), and the math is brutal.

I used a Vanguard SEP IRA for my first two years of freelancing. At the time, my net income was around $50,000, so the SEP limit of $12,500 was more than I could afford to put away anyway. The simplicity appealed to me. No Form 5500-EZ. No employee deferral math. Just transfer money, buy VTSAX, and forget about it.

Vanguard’s fund lineup is the reason people tolerate their clunky website. VTSAX (Total Stock Market Index), VTIAX (International), and VBTLX (Total Bond) cover the entire investable world at microscopic cost. Their target-date funds, like the 2050 option, automatically rebalance and glide toward conservatism as you age. Expense ratio: 0.08%. It is almost insultingly cheap.

The honest downside: The contribution limit is the real constraint. Once my income climbed past $70,000 net, the SEP cap started costing me money at tax time. I was leaving thousands in allowable deductions on the table. Vanguard also offers a solo 401k, but it has no brokerage window. You are restricted to Vanguard’s own mutual funds. That is fine for purists, but if you ever want to buy an individual stock or a non-Vanguard ETF, you are out of luck. Their website is also slower and less intuitive than competitors, though they have improved it marginally in the last year.

If you earn under $60,000 net from freelancing and you want the simplest possible setup, the Vanguard SEP IRA is still a respectable choice. Just know that you will probably outgrow it.

Fidelity solo 401k: the pick for rollovers and brokerage junkies

Fidelity’s solo 401k offers the widest investment menu of the three. You get a true brokerage window inside the plan, meaning you can trade stocks, ETFs, bonds, CDs, and even some options strategies. Commission-free stock and ETF trades apply, and Fidelity’s research tools are excellent if you like to dig into holdings.

The rollover process is where Fidelity shines. They accept incoming rollovers from virtually any retirement account type, including SEP IRAs, traditional IRAs, old employer 401ks, and even some pension lump sums. If you have three old 401ks from previous jobs and a SEP IRA from your freelance starter years, Fidelity will consolidate them into a single solo 401k with minimal paperwork. I helped a friend do this in 2024. The whole process took ten days and one phone call.

Fidelity also offers excellent customer service. Their small-business retirement specialists are knowledgeable and patient, which matters when you are trying to understand whether your contribution deadline is December 31 or your tax filing deadline. (For employee deferrals, it is December 31. For employer profit-sharing contributions, it is the tax filing deadline including extensions.)

The honest downside: Fidelity charges $0 for the solo 401k itself, but some of their actively managed funds carry expense ratios above 0.50%. If you stick to their Spartan index funds or commission-free ETFs, you avoid this. Their brokerage interface can also feel overwhelming if you are used to the stripped-down simplicity of Vanguard. And while they offer a Roth option for employee deferrals, like Etrade, their online application process for the solo 401k is more involved. You fill out a PDF, mail or fax it, and wait for confirmation. Etrade lets you do more of it online.

If your financial life is messy, with multiple old accounts scattered across providers, Fidelity is the best place to consolidate everything into one solo 401k. The rollover department is genuinely good at their job.

Contribution limit cheat sheet

Here are the numbers for the 2025 tax year, which is what you will likely be planning around.

SEP IRA employer contribution: up to 25% of net self-employment earnings, capped at $69,000.

Solo 401k employer contribution: same 25% rule, same $69,000 cap.

Solo 401k employee deferral: $23,000 pre-tax or Roth, plus a $7,500 catch-up if you are 50 or older.

Combined solo 401k maximum: $69,000 (or $76,500 if 50+), assuming your income is high enough to hit the cap.

To max out the full $69,000 in a solo 401k, you need roughly $184,000 in net self-employment income after expenses. That is because 25% of your net minus one-half of self-employment tax must equal the employer portion, and then you add the $23,000 deferral on top. Most freelancers will not hit the absolute cap, but the ability to add the employee deferral on top of the employer share still makes the solo 401k the winner for anyone earning more than about $50,000 net.

Internal links for managing freelance money

While you are sorting out retirement, check out our guides to the best budgeting software for variable income, the best business banking for freelancers, and the best bookkeeping software for freelancers. Retirement accounts are the last step. You need the cash flow and bookkeeping infrastructure in place first.

Who should skip the solo 401k and stick with a SEP IRA

If your freelance income is under $50,000 net per year, the extra paperwork of a solo 401k might not be worth the marginally higher contribution limit. A SEP IRA at Vanguard is simpler, cheaper, and requires no Form 5500-EZ ever.

If you plan to hire employees within the next two years, a solo 401k becomes unusable the moment you bring on a non-spouse worker. You would have to terminate the solo plan and start a traditional 401k. If you see that coming, a SEP IRA is easier to maintain through the transition, since SEPs naturally accommodate employees.

And if you already have a comfortable retirement setup through a spouse’s employer plan, and you are only freelancing for side income, a SEP IRA might be plenty. The solo 401k advantage really shows up for full-time freelancers who are trying to maximize tax-deferred savings on a six-figure income.

The day I almost missed my solo 401k deadline

In December 2023, I realized I had not opened my Etrade solo 401k yet. I had been planning to do it since August. Every week, I told myself I would handle it after I finished the current client project. Then another project arrived. Then the holidays hit.

I called Etrade on December 22. A surprisingly calm representative named David walked me through the application. The PDF was eight pages. I needed my EIN, my business address, and a plan adoption agreement. I did not have the adoption agreement template. David emailed it to me while we were on the phone. I signed it, scanned it on my phone, and emailed it back at 4:47 p.m. Eastern time.

By December 23, the account was open. I funded the employee deferral on December 28. The wire cleared on December 29. I had cut it so close that my hands were shaking while I clicked “confirm transfer.” If I had missed that deadline, I would have lost the entire $23,000 employee deferral for the 2023 tax year. That would have cost me roughly $5,750 in extra federal taxes, plus state.

The lesson is mechanical: set a calendar reminder for November 15 every year. Not December. Not “when I have time.” November 15. Open the account then. Fund it by December 1. Give yourself buffer, because brokerage paperwork moves slower in holiday weeks, and customer service hold times stretch into half-hour territory.

I now keep a folder in my email labeled “Retirement - Tax Year 20XX” with the plan agreement, contribution confirmations, and the Form 5500-EZ filing receipt. It took one panic December to teach me that lesson. Do not learn it the way I did.

Questions freelancers ask about retirement accounts

Is a solo 401k better than a SEP IRA for freelancers?

Yes, if you want to save more. A solo 401k combines an employer contribution of up to 25% of net earnings with a separate employee deferral of $23,000 per year. A SEP IRA only offers the employer portion. For the same income, the solo 401k often doubles your allowable contribution.

Can I open a solo 401k if I already have a SEP IRA?

Yes. You can roll an existing SEP IRA into a new solo 401k without tax consequences. Many providers, including Etrade and Fidelity, accept incoming rollovers and will walk you through the paperwork.

Do I need employees to open a solo 401k?

No. A solo 401k is specifically for self-employed individuals with no employees other than a spouse. If you hire anyone besides a spouse, you must switch to a traditional 401k.

What is the deadline to open a solo 401k?

Technically December 31 of the tax year, but practically you should open one by early December to fund it before your tax return deadline. For SEP IRAs, the deadline is the tax filing deadline including extensions, which makes them easier to fund retroactively.

Can freelancers deduct solo 401k or SEP IRA contributions?

Employer contributions are deductible as a business expense. Employee deferrals reduce your taxable income for the year. The combination can significantly lower your tax bill, though exact savings depend on your marginal rate.

What I would do if I started freelancing tomorrow

I would open an Etrade solo 401k immediately. I would fund the employee deferral first ($23,000), then calculate the employer contribution after doing my quarterly estimated taxes. I would keep the investments simple: 60% VTI, 30% VXUS, 10% BND. I would rebalance once a year on my birthday.

If my net income was under $50,000, I would open a Vanguard SEP IRA instead and buy VTSAX until my income grew. I would set a calendar reminder to reassess at $60,000 net.

The biggest mistake I see freelancers make is waiting. They wait until tax season, then rush to open an account in March for the previous year. By then, the solo 401k deadline has passed. The SEP IRA is more forgiving, but procrastination still costs you months of market growth. Open the account now. Fund it monthly. Treat it like a bill you cannot skip.

Your future self, sitting on a beach in Portugal with a fully funded retirement, will thank you. Mine probably will not, because I will still be checking my portfolio on my phone. But at least the numbers will look good.