When planning for retirement, it’s essential to understand the various savings vehicles available and how they align with your financial goals. Two prominent options are the 401(k) plan and the Simplified Employee Pension Individual Retirement Account (SEP IRA). While both offer tax-advantaged growth, they differ in structure, contribution limits, and suitability depending on your employment status and business structure. Let’s delve into these differences to help you determine which plan might be more appropriate for your situation. Understanding the 401(k) Plan A 401(k) is a retirement savings plan commonly offered by employers to their employees. As an employee, you can elect to defer a portion of your salary into this plan, reducing your taxable income for the year. Employers often enhance this benefit by offering matching contributions, effectively augmenting your retirement savings. For 2025, the contribution limits are as follows: Employee Contribution Limit: Up to $23,500. Catch-Up Contributions: If you’re aged 50 or older, you can contribute an additional $7,500, bringing your total potential contribution to $31,000. Combined Contribution Limit: The total of employee and employer contributions cannot exceed $70,000. One notable feature of the