SEP vs SIMPLE

[Confused63]

I understand being self-employed you can only contribute to either a SEP or SIMPLE plan but can you have both?

I have a SIMPLE plan and wish to keep it but not contribute to it any more.  I wish to open a SEP plan and contribute to it since the contribution amount is based on profits, a higher amount for me right now.

Is this allowed by the IRS?

[dmertz]

"can you have both?"

Nothing prevents you from continuing to keep investments in either type of account even though contributions to the account cease, but as you said, you can only maintain one of these for a given calendar year.  However, a likely problem with your proposal is that the deadline to terminate the existing SIMPLE IRA plan to replace it with a SEP plan for 2024 was November 2, 2023.

https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan#terminate

Not yet reflected in that IRS link is the fact that the SECURE 2.0 Act changed the tax code to allow terminating a SIMPLE IRA plan mid-year and replacing it with a 401(k) plan, but that change to the tax code does not apply to replacing the SIMPLE IRA plan with a SEP plan.  However, since you can contribute more to an individual 401(k) plan than you can contribute to a SEP plan (or to a SIMPLE IRA plan), it would probably make sense to establish an individual 401(k) plan for 2024 instead of waiting until 2025 to establish a SEP plan, although the individual 401(k) plan would require a bit more work and potential reporting requirements, depending on the balance in the plan.