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Profit Sharing Plan vs 401(k) vs SEP IRA: Which Retirement Plan Wins?
Published on January 1, 2026
As a business owner, choosing the right retirement plan can feel overwhelming. Profit sharing? 401(k)? SEP IRA?
The right choice depends on your business situation, budget, and goals.
Head-to-Head Comparison
| Feature | Profit Sharing | 401(k) | SEP IRA |
|---|---|---|---|
| 2026 limit | $68,000 | $23,000 + match | $69,000 |
| Who contributes | Employer only | Employee + employer | Employer only |
| Complexity | Moderate | High | Low |
| Discretionary | Yes | Match required | Yes |
When Each Wins
Profit Sharing Wins:
- Maximum contribution limits
- Flexibility to skip in bad years
- Want to reward employees without requiring participation
401(k) Wins:
- Want employees to save too
- Roth option needed
- Loan feature desired
SEP IRA Wins:
- Simplest administration
- Few employees
- Lower setup costs
Best Strategy: Combine Plans
Many businesses use multiple plans: Profit Sharing + 401(k) for maximum benefits.
Disclaimer: Consult professionals.
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Brandt Hudson
CEO of Infinite Wealth Group