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 the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist 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.