Short answer: for a dentist with no employees, a Solo 401(k) usually beats a SEP IRA — same or higher contribution potential, plus a Roth option and loan feature. Once you have staff, the choice shifts to a SIMPLE IRA or a full 401(k) (often with profit sharing). The right plan depends mostly on whether you have employees and how much you want to shelter.
Which retirement plan is best for a solo dentist?
If you have no full-time employees other than yourself (and a spouse), a Solo 401(k) is usually the winner. At the same income it generally allows contributions at least as large as a SEP IRA — because you can make both an employee deferral and an employer contribution — and it adds features a SEP lacks: a Roth option, catch-up contributions at 50+, and the ability to borrow from the plan.
| Plan | Best for | Notable features |
|---|---|---|
| Solo 401(k) | Owner, no employees | High limits, Roth option, loans, catch-up |
| SEP IRA | Owner, few/no employees | Simple to run; employer-only; no Roth |
| SIMPLE IRA | Small practices with staff | Lower limits; easy, low-cost for teams |
| 401(k) + profit sharing | Practices with employees | Flexible; pairs with cash balance plans |
| Cash balance plan | High earners wanting to shelter more | Large deductions; added on top of a 401(k) |
Why does a Solo 401(k) usually beat a SEP IRA?
- It lets you contribute as both employee and employer, often reaching the max at a lower income than a SEP.
- It offers a Roth option; traditional SEP IRAs generally don’t.
- It allows catch-up contributions once you’re 50+.
- It can permit loans from the plan (a SEP can’t).
- A held SEP or traditional IRA balance can complicate the backdoor Roth pro-rata rule — a Solo 401(k) sidesteps that.
What if I want to shelter even more?
High-earning owners who are already maxing a 401(k) and want larger deductions should look at adding a cash balance plan on top. Layered with a 401(k)/profit-sharing plan, it can shelter far more than a defined-contribution plan alone — one of the most powerful tools available to a profitable practice.
How should this fit the bigger picture?
The plan is one piece of a coordinated strategy that also covers your personal accounts, taxes, and how much you can safely shelter given your reasonable S-corp salary. We compare practice plans in depth in retirement plans for dental practices, compared. Set the design with your CPA and advisor together.
Frequently asked questions
For a dentist with no employees, usually yes. A Solo 401(k) generally allows the same or higher contributions at a given income, plus a Roth option, catch-up contributions, and a loan feature that a SEP IRA lacks. A SEP is simpler to administer but less flexible.
With staff, most practices use a SIMPLE IRA (simple and low-cost) or a full 401(k) with profit sharing (more flexible and higher limits). High earners often add a cash balance plan on top of a 401(k) to shelter significantly more.
It’s generally not efficient to run both, and holding a SEP/traditional IRA balance can complicate backdoor Roth conversions via the pro-rata rule. Most solo dentists are better served consolidating into a Solo 401(k). Coordinate any change with your CPA.
Sources
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is a financial planner and founder of Dental Wealth Partners, a non-commission, fee-only financial planning firm for dentists. He is the author of The Wealthy Dentist: Smarter Money. Less Stress. More Life. and hosts the Smiles & Cents podcast.
Keep reading
- Retirement plans for dental practices, comparedA comparison of 401(k), safe harbor, profit sharing, SEP-IRA, and cash balance plans for dental practice owners — and how to choose.
- Cash balance plans for dentists, explainedHow high-income dental practice owners can use a cash balance plan to shelter more than a 401(k) allows — and how to tell whether it fits.
- What’s a reasonable S-corp salary for a dentist?S-corp dentists must pay themselves a “reasonable” W-2 salary before taking distributions. How the rule works and why setting it too low is risky.