Retirement Plans for Real Estate Agents: SEP IRA, Solo 401(k), and Beyond

Real estate agents have no employer 401(k) to contribute to. The brokerage does not offer retirement benefits because agents are independent contractors, not employees. But the self-employed retirement plan options are actually better than most employer plans, allowing contributions up to $70,000 per year (2025) or even more with catch-up provisions and defined benefit plans. The contributions reduce taxable income, which reduces both income tax and (for sole proprietors) the QBI deduction calculation.

Why is the Solo 401(k) better than the SEP for most agents?

The Solo 401(k) has two components: an employee deferral (a flat dollar amount, $23,500 for 2025) and an employer contribution (up to 25% of W-2 salary or approximately 20% of net SE income for sole proprietors). For current guidance, see IRS Retirement Plans for Small Business. The SEP has only the employer-contribution component (same percentage limits, no employee deferral).

For agents earning $80,000-$250,000 in net profit, the employee deferral in the Solo 401(k) allows significantly higher total contributions than the SEP.

The Solo 401(k) also offers:

• Roth option: The employee deferral can be designated Roth (after-tax, tax-free growth). The SEP has no Roth option.
• Loan provision: The agent can borrow up to $50,000 or 50% of the vested balance from the Solo 401(k). The SEP does not allow loans.
• Deadline advantage for the deferral: The employee deferral must be elected by December 31 of the plan year. The employer contribution can be made up to the filing deadline (including extensions).

The SEP’s main advantage is simplicity: it can be established and funded up to the filing deadline (October 15 with extension). A Solo 401(k) no longer has to be set up by December 31 either: an agent with no employees can adopt one by the filing deadline, including extensions, and have it treated as in place for the prior year, and a sole proprietor’s first-year employee deferrals can be made up to the unextended filing deadline.

What about agents over 50?

Catch-up contributions make the Solo 401(k) even more powerful for older agents:

• Ages 50-59 and 64+: Additional $7,500 catch-up (total employee deferral: $31,000 for 2025)
• Ages 60-63 (SECURE 2.0 super catch-up): Additional $11,250 catch-up (total employee deferral: $34,750 for 2025)

A 62-year-old agent earning $200,000 in net profit can contribute $34,750 employee deferral + approximately $33,000 employer contribution = $67,750 to a Solo 401(k). The tax savings at a 32% marginal rate: approximately $21,680.

For agents over 55 with consistently high income ($300,000+), a defined benefit plan allows contributions exceeding $200,000 per year. The DB plan is actuarially determined based on the agent’s age, target retirement benefit, and years until retirement. The closer the agent is to retirement, the higher the annual contribution (because there are fewer years to fund the benefit). A 60-year-old agent with a $300,000 income can contribute approximately $250,000/year to a DB plan.

What if the agent has a team?

The Solo 401(k) is not available if the agent has full-time employees (other than the agent and their spouse). An agent who employs buyer’s agents, transaction coordinators, or assistants as W-2 employees must use a different plan structure:

SEP IRA: The employer contribution percentage must be the same for the agent and all eligible employees. If the agent contributes the effective 20% of net SE income (the self-employed equivalent of a 25% rate), each eligible employee receives 25% of their salary.

Safe Harbor 401(k): The employer makes a 3% nonelective contribution or a 4% match for all eligible employees. This is less expensive than the equal-percentage SEP requirement and eliminates nondiscrimination testing. The agent can make the full $23,500 employee deferral regardless of what employees contribute.

SIMPLE IRA: For teams with 100 or fewer employees. The employer makes a 2% nonelective contribution or a 3% match. Employee deferrals are limited to $16,500 for 2025 ($17,600 for employers with 25 or fewer employees), which is lower than the 401(k) limit. The SIMPLE is simpler to administer but caps the agent’s own contributions lower.

If team members are independent contractors (1099), they are not eligible employees and do not need to be covered by the agent’s plan. The Solo 401(k) remains available if all team members are 1099 contractors.

How does the S-Corp affect retirement contributions?

For an agent operating through an S-Corp, the retirement contribution base is the W-2 salary. The employer contribution is 25% of W-2 salary. The employee deferral ($23,500 + catch-up) comes from the W-2 salary.

This creates a planning dynamic: the W-2 salary must be high enough to support the desired retirement contribution but low enough to maintain payroll tax savings. An agent who wants to contribute $70,000 to a Solo 401(k) needs a salary of at least $186,000 (to generate a 25% employer contribution of $46,500, plus the $23,500 employee deferral). If the total S-Corp profit is $250,000, the $186,000 salary leaves only $64,000 as a distribution, which limits the payroll tax savings.

The optimal salary balances retirement contributions, payroll tax savings, and QBI deduction (the 20% QBI deduction applies to K-1 income, not W-2 salary, so a higher salary reduces the QBI deduction).

Related guides:

• Entity structure for agents, how the S-Corp election affects the salary base for retirement contributions and the QBI deduction

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.