Solo 401(k)s Pack a Retirement Punch

All the benefits of a traditional 401(k) and more: Like a traditional 401(k), a solo plan allow the same pre-tax "employee" contributions up to the $16,500 federal limits, with taxes deferred until withdrawal. Alternately, you can choose a Roth solo 401(k), make contributions with after-tax money and pay no taxes on withdrawal. That's a good choice if you expect to be in a higher tax bracket at retirement.

You can even borrow from your solo 401(k) balance if your provider allows it, which isn't an option with SEP or SIMPLE IRAs.

And here's the great thing: Since you're your own boss, you can also make additional "employer" or "profit-sharing" contributions. In fact, you can stash up to 20% of your net adjusted business profit -- income, less expenses and half of your self-employment tax -- in the plan, up to $49,000 this year. If your business is incorporated, the dollar amount remains the same, but you can contribute 25% of your W-2 earnings. Either way, your adjusted gross income will drop, which can mean a significant tax cut.

Comparing the SEP and SIMPLE options: With both a SEP IRA and a SIMPLE IRA, you can contribute up to 20% of your net adjusted business profit (or 25% of W-2 earnings in a corporation) as "profit sharing." The SEP IRA, however, has no provision for either salary deferrals (the $16,500 maximum) or catch-up contributions. SIMPLE IRAs, meanwhile, allow an $11,500 salary deferral and up to just 3% of your business profit or compensation, plus a $2,500 catch-up contribution for eligible participants. Thus, in most cases, the solo 401(k) allows you to save the most.