Retirement Planning for the Self-Employed
No employer 401(k)? That's not a gap — it's an opening. As your own boss you get access to retirement accounts with far higher contribution limits than a typical employee. This guide walks the real options — SEP-IRA, Solo 401(k), and traditional/Roth IRA — who each one fits, the 2026 IRS limits, and how contributions cut your tax bill.
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Why retirement planning is different when you're self-employed
When you work for someone else, retirement mostly happens to you: there's an employer match, money leaves each paycheck automatically, and the plan is chosen for you. On your own, none of that is automatic. There's no match, no payroll deduction, and your income swings month to month — so it's on you to open an account and decide what to put in.
Here's the reframe that matters: the trade-off runs in your favor. The accounts built for the self-employed carry much higher contribution limits than a standard employee 401(k) or IRA. Where an employee is capped at the elective deferral, a self-employed owner can also contribute as the "employer" — stacking toward a combined limit of $72,000 (2026) per the IRS. The lack of a company plan isn't a burden; it's access to more room. The rest of this page is about using it.
Your main options
Four accounts do most of the work for freelancers and solo owners. The dollar figures below are the 2026 limits published by the IRS (Notice 2025-67) — always check the current-year figures before you contribute.
SEP-IRA
Who it fits: solo owners who want the simplest possible setup and contribute from business profit. How the limit works: employer-only contributions of up to 25% of eligible compensation, capped at $72,000 (2026) per the IRS. There's no employee deferral — it's one percentage of income, which keeps the paperwork minimal.
Solo 401(k)
Who it fits: owners with no employees (other than a spouse) who want to put away the most at a given income. How the limit works: you contribute as both employee and employer — an employee elective deferral of up to $24,500 (2026) plus employer profit-sharing, combined up to $72,000 (2026) under age 50, per the IRS. Because the deferral goes in first, you often hit a high number at a lower income than SEP would allow.
Traditional IRA
Who it fits: anyone wanting a simple account they can open anywhere, often alongside a SEP or Solo 401(k). How the limit works: a flat annual contribution of up to $7,500 (2026), or $8,600 (2026) if you're age 50 or older (a $1,100 catch-up), per the IRS. Contributions may be deductible depending on your income and coverage.
Roth IRA
Who it fits: people who'd rather pay tax now for tax-free withdrawals later, and who fall under the income eligibility limits. How the limit works:the same $7,500 (2026) cap ($8,600 (2026) if 50+) as a traditional IRA, per the IRS — but funded with after-tax dollars, so qualified withdrawals in retirement come out tax-free.
Educational information only, not financial or tax advice — confirm with your tax professional or financial advisor.
SEP-IRA vs Solo 401(k)
This is the decision most solo owners actually face, because both can reach the same $72,000 (2026) ceiling. The difference is how you get there.
SEP-IRA is the simplest: one employer contribution, a percentage of income, almost no ongoing admin. But because it's percentage-only, reaching a big number takes a higher income.
Solo 401(k) lets you front-load the $24,500 (2026) employee deferral before the percentage-based employer piece, so at a moderate income you can often contribute more than a SEP would allow. It also typically offers a Roth option and the ability to take a loan — at the cost of a bit more paperwork (and a Form 5500-EZ once assets pass the IRS threshold). Simple and hands-off, or higher effective contributions with more admin: that's the trade.
How retirement contributions cut your tax bill
Traditional SEP-IRA, Solo 401(k), and traditional IRA contributions are generally deductible, which lowers your taxable income for the year — so putting money away for later also shrinks this year's tax bill. Roth contributions work the other way: after-tax now, tax-free qualified withdrawals later.
Here's the lever that's easy to miss. SEP-IRA and Solo 401(k) employer contributions are a percentage of your net self-employment income — that's income minus your captured business expenses. So the cleaner your expense records, the more accurate that net figure is, and the more precisely you can size a percentage-based contribution. Missed expenses inflate your taxable income and distort the base your contribution room is calculated from.
That's where ExpenseBot fits: it's spend capture for the self-employed — pulling receipts from Gmail and uploads into a clean, categorized record so your net self-employment income reflects reality, not a rushed year-end guess. Accurate spend capture both lowers your taxable income and gives percentage-based plans a solid number to work from. You can sanity-check the tax side with the self-employment tax calculator and keep deductions organized with the Schedule C expense tracker.
Educational information only, not financial or tax advice — confirm with your tax professional or financial advisor.
Getting started
A practical path from "I should do this" to money actually invested:
- Estimate your net self-employment income — income minus captured expenses. This is the base every percentage-based limit is built on, so start here.
- Pick an account — SEP-IRA for simplicity, Solo 401(k) to contribute more at a moderate income or to get the Roth/loan options, and a traditional or Roth IRA to layer on top.
- Open it before the deadline — account-opening and contribution deadlines differ by plan type and can extend into the following year with an extension. Confirm the current-year dates for your chosen account.
- Automate contributions on a variable-income schedule — rather than a flat monthly amount, contribute more in strong months and less (or nothing) in lean ones, so a slow stretch never forces you to skip.
- Revisit yearly — as income grows, the SEP-vs-Solo math can flip, and catch-up room opens at 50. Re-check against the current-year IRS limits.
Deciding how much to draw versus reinvest is its own question — the how much to pay yourself guide walks that math. This is general guidance, not a recommendation for your situation.
Educational information only, not financial or tax advice — confirm with your tax professional or financial advisor.
SEP-IRA vs Solo 401(k) vs Traditional IRA vs Roth IRA
A side-by-side of the four accounts. Dollar figures are 2026 IRS limits (Notice 2025-67) — verify the current-year numbers before contributing.
| Account | Who it fits | Contribution structure | 2026 limit (IRS) | Admin effort | Roth option |
|---|---|---|---|---|---|
| SEP-IRA | Solo owners wanting the simplest setup | Employer-only, up to 25% of eligible compensation | Up to $72,000 (2026) | Low | Generally no |
| Solo 401(k) | No-employee owners wanting max contributions | Employee deferral + employer profit-sharing | $24,500 deferral (2026); combined up to $72,000 (2026) under 50 | Moderate | Usually yes |
| Traditional IRA | Anyone; often layered on a SEP/Solo 401(k) | Flat individual contribution (pre-tax, if deductible) | $7,500 (2026); $8,600 (2026) if 50+ | Low | N/A (see Roth IRA) |
| Roth IRA | Those under income limits wanting tax-free withdrawals | Flat individual contribution (after-tax) | $7,500 (2026); $8,600 (2026) if 50+ | Low | Yes (this is the Roth) |
Educational information only, not financial or tax advice — confirm with your tax professional or financial advisor.
Start with an accurate net income
Percentage-based retirement plans are only as good as the number they're built on. ExpenseBot captures your spend so your net self-employment income is real, not a guess.
Start free — no credit card, 60-day trialFrequently asked questions
What's the best retirement account for self-employed people?
It depends on income and how much admin you want. SEP-IRAs are the simplest; Solo 401(k)s often allow larger contributions at moderate income and offer a Roth option. Compare both against your numbers. Estimates — confirm with your tax professional or financial advisor.
How much can I contribute as a self-employed person?
It's tied to your net self-employment income and the IRS annual limits, which differ by account type. Because percentage-based plans depend on your net income, accurate expense records directly affect your contribution room. Check the current-year IRS limits.
Do retirement contributions lower my taxes?
Traditional SEP, Solo 401(k), and IRA contributions are generally deductible, reducing your taxable income for the year. Roth contributions don't reduce today's taxes but grow tax-free. Confirm specifics with your tax professional.
SEP-IRA or Solo 401(k) — which should I pick?
SEP for simplicity and employer-only contributions; Solo 401(k) if you want to contribute more at a given income or want a Roth/loan option and can handle a little more paperwork.
Educational information only, not financial or tax advice — confirm with your tax professional or financial advisor.