August 3, 2025

Retirement Planning for Personal Trainers: SEP-IRA vs. Solo 401(k) Tax Benefits

Secure your financial future with these retirement tips for personal trainers.

As a personal trainer, you're building a business that depends on your physical ability to perform. That's why retirement planning isn't just about saving money—it's about creating tax-advantaged wealth that can replace your income when you're ready to step back. The question is: SEP-IRA or Solo 401(k)?

Why Personal Trainers Need Strategic Retirement Planning

Many doctors get a late start to saving for retirement because we spend so many years in training before their first attending jobs—and the same applies to fitness professionals who often start their careers later after exploring other paths.

The Personal Trainer Retirement Challenge:

  • Physical demands may limit career longevity
  • Variable income makes consistent saving difficult
  • Traditional employer benefits aren't available
  • Need maximum tax deductions to offset high self-employment taxes

SEP-IRA: The Simple Solution

A SEP-IRA (Simplified Employee Pension) is the easiest retirement plan for self-employed personal trainers to implement and maintain.

SEP-IRA Key Features:

  • Contribution limit: Up to 25% of compensation or $69,000 (2024)
  • No annual filing requirements
  • Easy to set up and maintain
  • Immediate tax deduction for contributions

How SEP-IRA Contributions Work: Only employers can make contributions to a SEP IRA account. Even if the contributor is a self-employed individual, they can only contribute in their capacity as an employer or business owner.

For self-employed trainers, your "compensation" is your net self-employment income minus half of your self-employment tax. This effectively limits your contribution to about 20% of your gross income.

SEP-IRA Example:

  • Gross income: $80,000
  • Net self-employment income: $75,000
  • Less: Half of SE tax: $5,297
  • SEP compensation: $69,703
  • Maximum contribution: $17,426 (25% of $69,703)
  • Tax savings at 22% bracket: $3,834

Solo 401(k): Maximum Contribution Potential

Depending on the income, solo 401(k) plans can offer bigger tax deductions and greater annual contribution limits than SEP IRAs. A Solo 401(k) allows you to contribute as both employee and employer.

Solo 401(k) Key Features:

  • Employee contribution: Up to $23,500 (2025)
  • Employer contribution: Up to 25% of compensation
  • Total limit: $70,000 (2025) or $77,500 if 50+
  • Loan option available
  • Roth contributions allowed

Solo 401(k) Contribution Strategy:

  1. Employee contribution: Up to $23,500 (100% of income if less)
  2. Employer contribution: Up to 25% of remaining compensation

Solo 401(k) Example (Same $80,000 Income):

  • Employee contribution: $23,500
  • Remaining compensation: $46,203
  • Employer contribution: $9,241 (20% of remaining)
  • Total contribution: $32,741
  • Tax savings at 22% bracket: $7,203

Real-World Scenarios for Personal Trainers

Scenario 1: New Trainer ($35,000 income)

  • SEP-IRA contribution: $6,194
  • Solo 401(k) contribution: $6,194
  • Winner: Tie (Income too low for Solo 401(k) advantage)

Scenario 2: Established Trainer ($65,000 income)

  • SEP-IRA contribution: $11,475
  • Solo 401(k) contribution: $23,500
  • Winner: Solo 401(k) (Saves additional $2,646 in taxes)

Scenario 3: High-Earning Trainer ($120,000 income)

  • SEP-IRA contribution: $21,223
  • Solo 401(k) contribution: $41,165
  • Winner: Solo 401(k) (Saves additional $4,387 in taxes)

The Backdoor Roth Consideration

SEP IRAs also count against you for a Backdoor Roth IRA because of the violation of the pro rata rule, whereas a solo 401k will allow you to do both.

If you're a high-earning trainer who also wants to do Backdoor Roth IRA conversions, the Solo 401(k) is your only option. SEP-IRA contributions will complicate the Backdoor Roth strategy due to the pro-rata rule.

Special Considerations for Personal Trainers

Variable Income Management:

  • Use percentage-based contributions for flexibility
  • Make contributions by tax filing deadline (including extensions)
  • Adjust contributions based on good and bad years

Equipment Purchases vs. Retirement:

  • Balance current business needs with retirement savings
  • Consider timing of large equipment purchases
  • Use retirement contributions to reduce tax burden in high-income years

S-Corp Integration: If you elect S-Corp status, your reasonable salary becomes the basis for retirement plan contributions. This can actually increase your contribution capacity compared to sole proprietorship.

Implementation Timeline

SEP-IRA Setup (1-2 weeks):

  1. Choose provider (Vanguard, Fidelity, Schwab)
  2. Complete application
  3. Make initial contribution
  4. Set up automatic contributions

Solo 401(k) Setup (2-4 weeks):

  1. Choose provider and plan type
  2. Complete plan adoption agreement
  3. Set up employee deferrals
  4. Establish employer contribution process
  5. Begin recordkeeping

The Bottom Line for Personal Trainers

If you want to have that additional tax advantaged option, having to navigate the Pro Rata rule (now and in future years) can be a huge disadvantage to using a SEP IRA.

Choose SEP-IRA if:

  • You earn less than $50,000 annually
  • You want maximum simplicity
  • You may add employees in the future
  • You don't need Backdoor Roth capability

Choose Solo 401(k) if:

  • You earn $50,000+ annually
  • You want maximum contribution potential
  • You want loan and Roth options
  • You plan to remain a solo business
  • You want Backdoor Roth flexibility

Professional Implementation

Both plans require proper setup and ongoing compliance. The tax benefits are substantial—up to $15,000+ in annual tax savings for high earners—but the implementation must be correct to avoid penalties.

Critical Success Factors:

  • Proper plan documentation
  • Accurate contribution calculations
  • Timely contribution deadlines
  • Appropriate investment allocation
  • Annual compliance monitoring

Ready to start building tax-advantaged retirement wealth? Our tax reduction planning services help personal trainers implement the optimal retirement strategy while maximizing current-year tax savings. We handle the complex calculations and ensure perfect compliance so you can focus on building your fitness business. Call us today to get started.