Before 2001, you could put away more money into certain types of Keogh plans than into a SEP. The 2001 Tax Act changed the rules so you could contribute as much as 20% of your Self-employment income into either a SEP or a Keogh.

The 2001 Tax Act also introduced the Solo 401k. With a Solo 401k, you can contribute 20% of your SE Income, just like with a SEP. Plus, you can max out the salary deferral component, which is $16.5k in 2009.

So if your only income is SE income, and you earn $100k, you could contribute $20k into a SEP or $36.5k into a Solo 401k. Earn $200k, and you could contribute $40k into a SEP or $49k ($54.5k if 50 or older) into a Solo 401k.

Earn $245k this year, and the most you could contribute into a SEP or a Solo 401k would be capped at $49k (unless you are 50 or older and then could contribute an additional $5.5k to the Solo 401k).

So whether you will be better off with a SEP or a Solo 401k depends on various factors including your self-employment income and how much you both plan to put away into your retirement plans this year.

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