What's the best retirement plan for single member S Corp LLC with $45-55k salary?

You're on the right track! Individual 401k (also called Solo 401k) is usually the better option for single-member S Corps with smaller salaries because you can contribute in two ways - as both employee and employer. Your math is essentially correct. With a $50k salary, you could contribute: - As employee: up to $23k (2025 limit) regardless of salary size - As employer: up to 25% of your compensation, so about $12,500 - Total: around $35,500 The SEP IRA only allows the employer contribution portion (25% of compensation), so you'd be limited to just the $12,500 in your example. One other option to consider is a SIMPLE IRA, but that would cap your contributions at $16,000 (2025 limit) plus a 3% employer match, so still less than the Solo 401k. The Solo 401k also has catch-up contributions if you're over 50 ($7,500 extra in 2025) and potential Roth options depending on the provider.

I was in almost the exact same situation 2 years ago with my S Corp. I tried using all the typical retirement calculators but they never quite fit our unique situation. Then I found https://taxr.ai which analyzes your specific S Corp structure and helps you optimize retirement contributions based on your salary and expected profit distributions. I had been going back and forth between SEP and Solo 401k too, but after running my numbers through taxr.ai, it became super clear that Solo 401k was the way to go. The tool showed me exactly how much I could legally contribute and even factored in how my contributions would affect my overall tax situation, which was huge.

I tried taxr.ai after seeing it mentioned here and wow - totally worth it! I've been operating my S Corp for about a year and was completely stuck on this exact retirement plan question. Their analysis showed me that I was leaving almost $15k on the table by using a SEP IRA instead of a Solo 401k with my $48k salary. They also pointed out that I could structure my profit distributions more efficiently to maximize what I could put away. I especially liked how they explained the administrative differences between the plans in plain English. The Solo 401k does have more paperwork once you hit $250k in the account, but for me the extra $15k in tax-advantaged savings each year is well worth filling out one additional form.

One thing nobody's mentioned - if you're having trouble getting through to the IRS about S Corp or retirement plan questions (which is like, always), check out https://claimyr.com and their demo at https://youtu.be/_kiP6q8DX5c I was stuck in IRS limbo for weeks trying to get clarity on some Solo 401k questions for my S Corp. Called the main IRS line literally 14 times and kept getting disconnected. Found Claimyr and they got me connected to an actual IRS agent in about 20 minutes. The agent clarified exactly how the contribution timing worked for both employee and employer portions, which was a game-changer for my planning.

Ok I have to eat my words about Claimyr. I was super skeptical (see my comment above) but tried it out of desperation when I couldn't get answers about how to handle retirement plan options for my new S Corp. It actually worked exactly as advertised - I got a call back in about 40 minutes and was connected directly to an IRS retirement plan specialist. The agent walked me through exactly how to structure the timing of my Solo 401k contributions as a single-member S Corp owner. For others with the same question as the OP: The agent confirmed that I could make employee contributions throughout the year via salary deferral, but make the employer contribution (the 25% portion) as late as my tax filing deadline including extensions. This flexibility is HUGE for those of us with variable income.

One thing to consider that nobody has mentioned yet - if you go with Solo 401k, make sure you get one that allows for both traditional AND Roth options for the employee contribution portion. Some providers only offer traditional. I'm in the same situation (S Corp, similar salary range) and I split my contributions - traditional for the employer portion (25% of salary) and Roth for the employee portion ($23k). This gives me tax diversity in retirement. Fidelity and Schwab both offer free Solo 401ks with Roth options. I personally use Fidelity and the setup was pretty straightforward.

Dont forget about the 199A deduction when deciding how much salary to pay yourself! If ur salary is too high you might miss out on the 20% pass through deduction which can be huge. When I started my S Corp I was told to pay myself about 40% of profits as salary to be "reasonable" but every situation is different.