Retirement Planning Waterfall

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

Client Profile

Earned Income

Spouse

IRA / Roth Considerations

SECURE 2.0

Optional Layers

Notes

Compensation Base

Plan Eligibility & Path

Contribution Waterfall

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
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
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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).
  7. 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).
  8. 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.
  9. 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.