Retirement

Retirement Accounts for the Self-Employed

A comparison of retirement savings options for freelancers, contractors, and small business owners. Save for retirement while reducing your tax bill.

Why Self-Employed Need Retirement Plans

Unlike employees who may receive employer-matched 401(k) contributions, self-employed individuals must set up their own retirement plans. The good news? These plans often offer higher contribution limits and better tax advantages.

Key benefit: Contributions to Traditional (non-Roth) retirement accounts are tax-deductible, reducing your current tax bill while you save for the future.

Option 1: SEP-IRA

2026 Contribution Limit

25% of net earnings

Max: $69,000

Best For

Solo freelancers

Pros:

  • High contribution limits
  • Easy to set up and maintain
  • Flexible - contribute varying amounts each year
  • No employee contributions to manage
  • Can use for employees (with conditions)

Cons:

  • All contributions are employer-only
  • No catch-up contributions for 50+
  • Must cover employees if you have them
  • No loan provisions
  • Vesting is immediate (yours to keep)

Option 2: Solo 401(k)

2026 Contribution Limit

Up to $69,000

+ $7,500 catch-up if 50+

Best For

High earners, those wanting loans

The Solo 401(k) is actually two plans in one: you contribute as an employee (up to $23,000 in 2026, plus $7,500 catch-up if 50+) AND as an employer (up to 25% of net earnings).

Pros:

  • Highest contribution limits available
  • Catch-up contributions for 50+
  • Can include Roth contributions
  • Can borrow from the plan (up to $50,000)
  • No requirement to cover employees

Cons:

  • More complex to set up
  • More annual paperwork
  • Must have no employees (except spouse)
  • Must file Form 5500-EZ if assets exceed $250K

Option 3: SIMPLE IRA

2026 Contribution Limit

$16,000

+ $3,500 catch-up if 50+

Best For

Those with employees

The SIMPLE IRA is designed for small businesses with fewer than 100 employees. The employer must make either matching contributions (up to 3% of compensation) or non-elective contributions (2% to all employees).

Pros:

  • Lower administrative costs than 401(k)
  • Required employee participation
  • Mandatory employer contributions
  • Easy to administer

Cons:

  • Lower contribution limits
  • Must include all employees meeting requirements
  • No catch-up for self-employed
  • Strict rules on withdrawals

Option 4: Traditional & Roth IRA

2026 Contribution Limit

$7,000

+ $1,000 catch-up if 50+

Best For

Anyone (supplements other plans)

Traditional and Roth IRAs are available to everyone, not just self-employed individuals. They can supplement your self-employed retirement plan.

Traditional IRA

  • Contributions may be tax-deductible
  • Grows tax-deferred
  • Taxed upon withdrawal
  • Required minimum distributions at 73

Roth IRA

  • Contributions are after-tax
  • Grows tax-free
  • Withdrawals are tax-free
  • No required minimum distributions

Comparison Table

Plan 2026 Limit 50+ Catch-up Best For
SEP-IRA 25% / $69K No Solo freelancers
Solo 401(k) $69K + emp $7,500 High earners
SIMPLE IRA $16,000 $3,500 With employees
Traditional IRA $7,000 $1,000 Supplement
Roth IRA $7,000 $1,000 Tax-free growth

How to Choose

Choose SEP-IRA if:

You're self-employed with no employees (except possibly a spouse) and want simple administration with high contribution limits.

Choose Solo 401(k) if:

You're self-employed with high income, want maximum contributions, or want the ability to take loans from your retirement account.

Choose SIMPLE IRA if:

You have employees and want lower administrative costs than a 401(k) while providing retirement benefits.

Add an IRA if:

You want additional tax-advantaged savings beyond your self-employed plan, or want Roth options for tax-free withdrawals in retirement.

Start Planning Your Retirement

The best time to start saving for retirement was yesterday. The second best time is today.

Calculate Tax Savings

Important Note

Contribution limits and rules can change each year. Always verify current limits before making contribution decisions. Consider consulting a financial advisor or tax professional for personalized retirement planning advice.