Retirement Planning Waterfall

Tax planning calculator — Solo 401(k) → Profit Sharing → Cash Balance → IRA layer

Client Profile

Tax Year

Entity TypeiHow the business is taxed. This sets what counts as plan compensation: an S-corp uses only the owner's W-2 wages (K-1 distributions don't count), while Schedule C and partnerships use net earnings from self-employment (net profit reduced by ½ SE tax and the plan-contribution deduction).

Owner AgeiDrives catch-up eligibility. Age 50+ unlocks the standard catch-up; ages 60–63 get the enhanced SECURE 2.0 "super catch-up"; age 55+ adds the extra HSA catch-up. Uses age attained during the plan year.

Filing StatusiSelects the income phase-out ranges used for Roth IRA eligibility and Traditional IRA deductibility. MFJ ranges are higher than Single/HoH; MFS phases out almost immediately.

Earned IncomeiOnly earned income supports retirement contributions. Investment income, rents, and S-corp distributions do not count. The plan-contribution base is derived from the figure below.

Schedule C Net ProfitiLine 31 of Schedule C. The tool converts this to net earnings from self-employment (× 0.9235 for ½ SE tax, then minus the plan deduction) before applying contribution limits — so your usable base is lower than gross net profit.

S-Corp W-2 Wages (owner)iOnly the owner's W-2 Box 1 wages count as plan compensation. K-1 / distribution income does not. Set this using reasonable-comp planning — too low a salary caps the retirement contributions the owner can make.

Reasonable comp via S-corp salary planning. Distribution income not eligible for plan contributions.

Number of W-2 Employees (excl. owner & spouse)iNon-owner eligible employees trigger coverage and nondiscrimination rules. A Solo 401(k) is only available with zero eligible common-law employees; adding staff pushes you toward SEP, SIMPLE, or a safe-harbor 401(k) where you must fund employees too.

SpouseiA spouse who is legitimately employed by the business becomes a second plan participant, potentially doubling household deferral and profit-sharing capacity. Compensation must be reasonable for actual work performed.

Spouse works in the business (W-2 / partner) iCheck if the spouse receives W-2 wages (S-corp/C-corp) or has self-employment earnings (Schedule C/partnership) from this business. This adds their own contribution capacity below.

IRA / Roth ConsiderationsiThese inputs decide whether direct Roth IRA contributions and Traditional IRA deductions are allowed — separate from the workplace plan above. If income phases you out, the backdoor Roth path is shown on the right.

Household MAGI (estimate)iModified Adjusted Gross Income — roughly AGI with certain deductions added back. It drives the Roth IRA phase-out and Traditional IRA deductibility. Estimate after the plan contributions above, since deductible contributions lower MAGI.

Spouse covered by workplace retirement plan iWhether the spouse is an active participant in any employer plan (Box 13 "Retirement plan" checked on their W-2). It changes the Traditional IRA deductibility phase-out — a spouse not covered gets a much higher threshold.

SECURE 2.0iProvisions from the SECURE 2.0 Act of 2022 that change how high earners can make catch-up contributions.

Prior-year FICA wages exceeded $150,000 (Roth catch-up rule) iSECURE 2.0 §603 mandatory Roth catch-up (final regs 9/2025, effective 1/1/2026). If a participant age 50+ had prior-year FICA / Social Security wages (W-2 Box 3) over the indexed threshold ($150,000 for the selected year) from the plan's employer, their age-50+ catch-up must be Roth — pre-tax catch-up is no longer allowed. Only the catch-up portion is affected, not the base deferral.
How it applies by entity:

Sole proprietor (Sch C) — net self-employment earnings are not FICA wages, so never subject, even with the same business last year. Pre-tax catch-up stays allowed.
Partnership / LLC (partner) — distributive share & guaranteed payments are self-employment income, not FICA wages → not subject.
S-corporation — the owner's W-2 Box 3 wages are FICA wages → subject if last year's exceeded the threshold.
C-corporation — same as S-corp: owner-employee W-2 wages count → subject if over the threshold.

Tested per employer on the prior calendar year — a first-year business with no prior wages isn't subject yet. Check this box only when a subject participant (age 50+ with qualifying W-2 wages) exists.

Optional LayersiAdditional tax-advantaged buckets stacked on top of the core defined-contribution plan.

Add Defined Benefit / Cash Balance plan iLayers a defined benefit / cash balance plan for very large deductible contributions (often $100K+), sized by age and income. Best for older, high-income owners with stable cash flow, since it creates an annual funding obligation. Contributions are actuarially determined.

HSA-eligible (HDHP coverage) iCheck if covered by a qualifying high-deductible health plan with no disqualifying coverage (e.g., general-purpose FSA, Medicare). The HSA is triple-tax-advantaged: deductible in, tax-free growth, tax-free for medical out.

Self-only HDHP iCoverage for just the account holder — the lower HSA contribution limit.

Family HDHP iCoverage for the holder plus at least one other person — the higher family HSA limit. An age-55+ catch-up can add more.

Notes

Compensation Base

Plan Eligibility & Path

Contribution Waterfall

Who Funds What & By When

Plan Establishment & Compliance Notes

Retirement Plan Reference — Three Angles

Quick selector across three dimensions: who can sponsor the plan, what investments it can hold, and how contributions are taxed.

Plan	Plan Category			Investment Access		Tax Treatment of Contributions
Plan	Self-Employed (no W-2 EEs)	Employer w/ W-2 EEs	Individual (IRA-style)	Securities (stocks, bonds, funds)	Alternatives (RE, PE, notes, crypto)	Pre-Tax (deductible)	Roth (non-deductible)
Solo 401(k)	✓	—	—	✓	via SDP¹	✓	✓
SEP IRA	✓	✓ all eligible²	—	✓	via SDP¹	✓	✓ since 2023³
SIMPLE IRA	✓	≤100 EEs²	—	✓	via SDP¹	✓	✓ since 2023³
Traditional / Safe Harbor 401(k)	if EEs hired	✓	—	✓	via SDP¹	✓	✓
Profit Sharing (employer contribution)	✓	✓	—	✓	via SDP¹	✓ employer-funded	✓ §326 election⁴
Defined Benefit / Cash Balance	✓	✓	—	✓	rare⁵	✓ employer-funded	—
Traditional IRA	—	—	✓	✓	via SDP¹	phase-out⁶	—
Roth IRA	—	—	✓	✓	via SDP¹	—	income-limited⁷
ROBS / C-Corp Blocker	✓	✓	—	limited	✓ operating equity⁸	✓	if Roth source⁹

Footnotes & Practitioner Notes

SDP = Self-Directed Provider. Standard custodians (Schwab, Fidelity, Vanguard) hold securities only. Alternatives — real estate, private equity, private notes, crypto, precious metals, LP / LLC interests — require a self-directed custodian (e.g., Equity Trust, Quest Trust, Madison Trust, Rocket Dollar) or a checkbook IRA LLC structure. Plan rules don't prohibit alternatives — the typical custodian's platform does. §4975 prohibited transaction rules apply rigorously to alternatives; UBTI / UDFI exposure must be analyzed for debt-financed property and operating business income.
SEP must cover all employees ≥21 years old who worked 3 of last 5 years and earned ≥$750 (2026), all at the same contribution percentage. SIMPLE limited to employers with ≤100 employees in prior year and no other qualified plan; mandatory employer match (3% dollar-for-dollar) or 2% non-elective.
SECURE 2.0 §601 (effective 2023) permits Roth SEP and Roth SIMPLE if the plan document allows — IRS Notice 2024-02 provides interim guidance. Custodian support remains uneven; verify before electing.
SECURE 2.0 §326 permits employer matching and non-elective contributions to be designated as Roth at the participant's election. Contributions must be 100% vested and reported on Form 1099-R. Operationally complex; few plans have implemented.
DB/CB plans typically use mainstream custodians for liquidity and actuarial valuation. Self-directed DB is technically permissible but operationally complex due to annual valuation and minimum funding requirements.
Traditional IRA contribution always allowed up to limit; deductibility phased out if active participant in employer plan and over MAGI threshold (creates basis for non-deductible portion, tracked on Form 8606).
Roth IRA direct contribution phased out at MAGI; backdoor Roth conversion remains available regardless of income (subject to §408(d)(2) pro-rata rule on aggregate IRA balances).
ROBS (Rollovers as Business Start-ups) uses a C-corp + qualified plan where retirement assets purchase Qualifying Employer Securities of the new C-corp. Designed for active operating business equity ownership. C-corp blocker structures separately allow passive minority equity in operating LLCs without UBTI/UDFI exposure to the retirement account.
If retirement source is Roth (e.g., Roth Solo 401(k) or Roth IRA), the ROBS / blocker investment retains Roth character; gains and exit proceeds are tax-free at qualified distribution.

Layering techniques (not standalone plans): Backdoor Roth = non-deductible Traditional IRA → Roth conversion. Mega Backdoor Roth = voluntary after-tax 401(k) contribution → in-plan Roth conversion or in-service distribution to Roth IRA. Both require plan document support for the latter.