SEP, solo 401(k), or a cash balance plan.

A SEP IRA and a solo 401(k) are defined-contribution plans. In 2026 the annual-additions ceiling is $72,000, before catch-up deferrals on the 401(k) side, and compensation above $360,000 drops out of the formula. That is a lot of money. It is also the entire defined-contribution lane. Past it, the next qualified plan is a defined benefit design: traditional or cash balance.

The IRS states the defined-benefit ceiling as a retirement annuity, $290,000 in 2026, not as a deposit. An actuary works backward. A 55-year-old with steady pay often sees a much larger illustrative credit than a 40-year-old with the same pay. Those illustrations are not quotes. Read Publication 560 for the small-business framework and the COLA table for the dollars.

How to choose without a spreadsheet fantasy

• If you want simplicity and might hire several people next year, stay with the SEP or 401(k). A pension is a multi-year funding promise. See when it is not a fit.
• If you are solo or spouse-only, income is durable, and you are over about 45, a cash balance or traditional defined benefit can be the larger deduction. Compare the two on defined benefit and self-employed cash balance.
• If you already have employees, the staff cost decides it. Start with staff cost, not with a national average.

Most owner designs we see are a 401(k) plus cash balance, because the 401(k) still takes the deferral and the pension takes the larger employer credit. Bring last year’s wages to the calculator only as a first sketch, then to a real census.