Question on Retirement Accounts - Small Business Related

[Balance]

Hello fellow Mustachians! I wanted to get some input on retirement accounts. I have a small business that I operate out of my home and I am the only employee. The business has some great advantages as I like the work I do and its extremely flexible.  My question is on retirement accounts for small businesses.  Right now I max out my Roth IRA and SEP every year.  There is also the option to moving from a SEP to a Solo 401k.  The Solo 401k would allow me to put a lot more away for retirement.  The only reason why I don't do it is because if I want to retire early ( I am hoping to retire or at least slow down significantly before 59), I won't be able to fully utilize my retirement accounts without being penalized. That is the reason I am doing the Roth and SEP combo and putting everything else in taxable accounts.  At least the taxable accounts will be available when/if I retire early.  Am I missing something here?  Does this sound like the correct strategy?  I am just concerned that if I make the switch to a Solo 401k I won't have much left over to keep in savings and taxable investments. Any thoughts or advice from other sole proprietors or tax pros would be greatly appreciated!

[bacchi]

Get EIN for your business.
Start solo 401k at Vanguard or Fidelity.
??? profit
When you're ready to ER, transfer 401k to tIRA.
When you're ER, and not making a lot of earned income, convert tIRA to Roth and pay little to no income tax.
Wait 5 years to pull out Roth conversion contributions.

You'll need a way to close the 5 year gap.

[protostache]

Get EIN for your business.
Start solo 401k at Vanguard or Fidelity.
??? profit
When you're ready to ER, transfer 401k to tIRA.
When you're ER, and not making a lot of earned income, convert tIRA to Roth and pay little to no income tax.
Wait 5 years to pull out Roth conversion contributions.

You'll need a way to close the 5 year gap.

Note that the prerequisite to that transfer is shutting down the 401(k) plan, not necessarily shutting down the business. One could end the plan, roll the funds, and keep operating the business part time to help cover the 5 year gap.

[robartsd]

Note that the prerequisite to that transfer is shutting down the 401(k) plan, not necessarily shutting down the business. One could end the plan, roll the funds, and keep operating the business part time to help cover the 5 year gap.

Yes, but income taxes will be based on earnings + Roth conversion amount.

[johnny847]

As others have discussed
http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

[Balance]

Wow all great replies.  I will look into setting up my Solo 401k with Vanguard!  Thanks a bunch guys/gals!