Small Business Retirement Plan Comparison Calculator

Every retirement plan comes with different IRS limits, administrative burdens, and employee coverage rules. Before comparing costs, you must understand the structural differences and maximum thresholds for 2026.

Note: For business owners aged 60 to 63, SECURE 2.0 introduces a higher "super catch-up" limit of $11,250 for 401(k) plans, pushing the total potential deferral even higher for those specific ages.

If you want to avoid the administrative costs and compliance testing of a full 401(k), your decision usually comes down to a SEP IRA or a SIMPLE IRA. While both are relatively inexpensive to set up, their financial mechanics are entirely different.

The SEP IRA: High Limits, Employer-Funded

A Simplified Employee Pension (SEP) IRA is funded entirely by the employer. Employees cannot defer their own salary into the plan. The business can contribute up to 25% of an employee's compensation, capped at $70,000 for 2026.

The catch? The percentage you contribute for yourself must be the exact same percentage you contribute for all eligible employees. If you want to contribute 20% of your $150,000 salary ($30,000) to your own account, you must also contribute 20% of your employees' salaries to theirs. If you have a large payroll, a SEP IRA can become incredibly expensive for the business.

The SIMPLE IRA: Shared Responsibility

A Savings Incentive Match Plan for Employees (SIMPLE) IRA shifts the burden. Employees can defer up to $16,500 of their own salary in 2026. As the employer, you are generally required to match their contributions dollar-for-dollar up to 3% of their compensation (or provide a 2% non-elective contribution to everyone).

This makes the SIMPLE IRA highly cost-effective for businesses with multiple employees. You provide a valuable benefit, but the employees must put "skin in the game" to get the match. However, your own personal contribution is capped much lower than it would be in a SEP or 401(k), making it harder to aggressively catch up if you are behind on how much you should save for retirement each month.

A Traditional 401(k) offers the ultimate flexibility and highest contribution limits, but it comes with higher administrative fees and regulatory complexity.

With a 401(k), you can defer $23,500 of your own salary, plus make employer matching and profit-sharing contributions to reach the $70,000 total limit. Unlike a SEP IRA, you can structure the employer match so that only employees who contribute receive the benefit, reducing your total outlay. You can also implement vesting schedules, meaning employees forfeit unvested employer contributions if they leave the company early.

The primary hurdle is Non-Discrimination Testing (ADP/ACP tests). The IRS requires these annual tests to ensure the plan does not disproportionately benefit highly compensated employees (like the owner) over rank-and-file workers. If your employees do not participate at high enough rates, your own personal contributions may be restricted or refunded to you.

Many businesses solve this by adopting a "Safe Harbor" 401(k) design, which bypasses testing in exchange for a mandatory, fully vested employer match (usually 4%). When weighing a 401(k), you must calculate whether the tax savings of your higher personal contribution outweigh the plan's annual recordkeeping fees and the cost of the Safe Harbor match.

If your business has zero common-law employees (independent contractors do not count), the Solo 401(k) is almost always the superior choice. It allows you to act as both the employee and the employer.

In 2026, you can defer 100% of your compensation up to $23,500 as an "employee." Then, your business can make an "employer" profit-sharing contribution of up to 25% of your compensation. Combined, you can reach the $70,000 limit much faster than you could with a SEP IRA, which relies entirely on the 25% employer contribution.

Furthermore, Solo 401(k) plans generally have zero or very low administrative fees and do not require IRS Form 5500 filing until the plan assets exceed $250,000. If you are preparing for a major liquidity event, such as an exit, maximizing a Solo 401(k) is a critical step before using a business sale retirement calculator to plan your next phase.

The calculator evaluates the financial impact of each plan by applying IRS limits to your specific payroll and desired contribution inputs. Here is the math behind the projections.

SEP IRA Employer Contribution Formula

For a SEP IRA, the employer contribution for any individual (including the owner) is capped by the statutory maximums and the chosen percentage:

SEP Employer Contribution = min(Salary × SEP Rate, Total DC Limit, Salary × Max SEP Percentage)

Where:

• Salary = The individual's annual compensation (capped at the $350,000 IRS limit for 2026).
• SEP Rate = The percentage of salary the business chooses to contribute for all eligible staff.
• Total DC Limit = The IRS defined contribution limit ($70,000 in 2026).
• Max SEP Percentage = The statutory limit of 25% of compensation.

401(k) Employer Match Formula

For a Traditional 401(k), the employer cost per participating employee depends on their deferral and your match cap:

Employer Match = min(Employee Deferral × Match Rate, Salary × Match Cap)

Where:

• Employee Deferral = The dollar amount the employee contributes from their own paycheck.
• Match Rate = The percentage of the employee's contribution you agree to match (e.g., 50% or 100%).
• Match Cap = The maximum percentage of the employee's total salary you will match (e.g., up to 6% of salary).
• Salary = The employee's annual compensation.

Total Plan Cost Formula

To determine the true financial impact on the business, the calculator sums the employer contributions and the administrative overhead:

Total Plan Cost = Owner Employer Contribution + Employee Employer Contributions + Total Admin Fees

Where:

• Owner Employer Contribution = The business's contribution to your personal account.
• Employee Employer Contributions = The total match or profit-sharing paid to staff accounts.
• Total Admin Fees = The base annual fee plus the per-participant fee multiplied by the number of enrolled employees.

Designing a retirement plan is an exercise in efficiency. Your goal is to maximize the dollars landing in your own account while providing enough employee benefit to aid retention, all without blowing up your corporate budget.

If your primary objective is hitting your retirement needs target, manipulating the match rate and profit-sharing inputs can reveal the most cost-effective path. For example, a high-income owner with five lower-paid employees might find that a Traditional 401(k) with a 4% Safe Harbor match allows them to max out their $70,000 limit for less total out-of-pocket cost than a SEP IRA, which would require giving every employee a massive 25% bonus.

Conversely, if employee participation is low, a SIMPLE IRA might be the most budget-friendly way to offer a benefit, even if it restricts your personal ability to save. By testing different participation rates and salary averages, you can build a retirement withdrawal strategy that accounts for your realistic accumulation phase.