SEP IRA vs. 401(k): The Real Cost

Most business owners choose a SEP IRA because it’s easy to set up, but that simplicity often comes with a massive hidden cost. In this video, we break down the "SEP IRA Trap" and why a 401(k) might save you thousands once you start hiring employees. We compare the specific net income required to hit the $72,000 maximum contribution limit and explore how the 25% mandatory employee match can drain your business capital. Whether you are a sole proprietor or an S-Corp owner, understanding these math-based differences is the key to maximizing your personal wealth while controlling employee benefit costs. Hi, I’m a Certified Financial Planner (CFP®) and Enrolled Agent (EA) helping business owners and high-income families navigate advanced tax strategies and build wealth independent of the business. My goal is to help you move from tax compliance to proactive tax planning in the process. WORK WITH ME: I help business owners optimize their business, reduce their tax liability, and build wealth. 👉 https://calendly.com/jmcfarlandfinanc... 📬 THE MCFARLAND MONEY LETTER: Get my weekly breakdown of tax strategies, market insights, and wealth-building tips delivered to your inbox. 👉https://jordanmcfarland.kit.com/money... Timestamps 0:00 – The most common retirement mistake for S-Corps 1:04 – The $120,000 Gap: Income requirements explained 1:44 – Breakdown of a 401(k) structure 2:34 – Why the SEP IRA is "all or nothing" 3:26 – The math behind the $72,000 max limit 4:04 – The "Trap": How hiring employees changes the cost 5:30 – Comparing Roth options and the Mega Backdoor Roth 7:46 – Comparison Table: Paperwork, Catch-ups, and Vesting 9:41 – Final Verdict: Which plan fits your 2026 goals? All investments involve risk, including possible loss of principal. Past performance is not a guarantee or indicator of future results, which may vary. No assurance can be given that profits will be achieved or that losses will not be incurred. The information provided and views expressed herein do not constitute advice or a recommendation of any kind nor is it an offer to sell or a solicitation to deal in any security or financial product. This video is provided for informational and educational purposes only. There is no guarantee that any statements, opinions, or forecasts provided herein will prove to be correct. Except as otherwise indicated, the information, views, and opinions contained in this video are based on matters as they exist as of the date of preparation of such material and not as of the date of distribution or any future date. Such views may change without notice, and SageSpring Wealth Partners LLC (“SageSpring”) and the speaker disclaim all responsibility to update such views. We believe the information referenced, including information obtained from third-party sources, is reliable but no representation regarding its accuracy is made. Neither SageSpring nor any individual speaker can be held responsible for any direct or incidental loss incurred by applying any of the information presented. This information is not intended to be relied upon as a forecast or research in any way and should not be solely relied upon as a forecast or research in any way and should not be relied upon when making an investment decision. It is provided with the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting, or other material considerations. To the extent that the viewer has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact or consult with the professional advisor of their choosing. The information herein is not intended to be tax or legal advice. Opinions and commentary do not take into account the investment objectives or financial situation of any particular investor or class of investors. Investors will need to consider their own circumstances before making an investment decision. This recording is the property of Jordan McFarland and should not be copied, distributed, published, or reproduced in whole or in part without his express written permission. Any advisory services are provided via SageSpring, which is registered with the United States Securities and Exchange Commission (“SEC”) as an investment adviser. SEC registration does not imply a certain level of skill or training. Any theoretical scenarios are for illustrative example only, and do not constitute advice.