SEP or ROTH 401K for self employed
If I’m self-employed (currently maxing out my ROTH IRA), should I set myself up with a SEP IRA and or ROTH 401K?
Currently, I have a SEP IRA because I’m trying to reduce my taxable income because I had to pay $25K in income taxes for 2020. Let me know your thoughts.
Permalink Submitted by Alan - IRA critic on Mon, 2021-05-31 19:27
If you are concerned with just current taxes and not so much with future taxes, you can reduce your taxable income most with a solo 401k (pre tax). A solo Roth 401k will not reduce current tax, but will reduce future taxes since contributions are taxed up front. A SEP IRA does not provide a Roth option, and the pre tax contributions to the SEP IRA will be less than what can be contributed to a pre tax solo 401k.