Retirement Plans for Self-Employed: Your Options, Compared

No employer match, no automatic enrollment — when you're self-employed, building retirement savings is entirely on you. The IRS gives solo operators access to some of the most generous contribution limits in the tax code across three main plans: the SEP IRA, the Solo 401(k), and the SIMPLE IRA. For full contribution rules and limits, see SEP IRA contribution limits.

Why Self-Employed Retirement Plans Matter More Than You Think

A freelancer or independent contractor paying self-employment tax (15.3% on 2025 IRS rules) already faces a higher baseline tax burden than a W-2 employee. Retirement contributions reduce your adjusted gross income dollar-for-dollar — they don't just save for later, they cut this year's federal tax bill now. At $100,000 in net self-employment income, contributing $20,000 to a SEP IRA or Solo 401(k) moves that $20,000 entirely out of your ordinary income calculation. This is an estimate based on 2025 IRS rules, not a substitute for professional tax advice.

None of these plans require payroll integration or an employer to sponsor them. You set them up yourself, fund them on your schedule, and deduct contributions on Schedule 1 of Form 1040.

The Three Plans: A Quick Map

Before diving into each plan, here's the landscape at a glance (2025 IRS rules):

• SEP IRA — up to $70,000/year, employer-only contributions, opens and funds up to your tax filing deadline including extensions, no EIN required
• Solo 401(k) — up to $70,000/year ($77,500 with catch-up if 50+), dual employee + employer contributions, must be established by December 31, EIN required
• SIMPLE IRA — up to $16,500/year in deferrals, mandatory employer contributions, generally the weakest fit for a solo operator. See the Solo 401(k) vs SEP IRA comparison for a full breakdown of when it applies.

SEP IRA: Simplest to Open, Generous at High Income

A SEP IRA uses a single employer-only contribution — roughly 20% of your Schedule C net profit, up to $70,000 for 2025 — and can be opened retroactively up to your tax filing deadline. It's the simplest plan to set up, but it has no Roth option and no catch-up contributions. See how it stacks up in the full Solo 401(k) vs SEP IRA comparison.

The tradeoff: no Roth option, no catch-up contributions, and if you have eligible W-2 employees, you must contribute the same percentage for them as you do for yourself. The full Solo 401(k) vs SEP IRA comparison covers every limitation and income-level scenario.

Solo 401(k): More Contribution Room at Moderate Income

The Solo 401(k) stacks two contributions — an employee deferral plus an employer profit-sharing contribution — which gives it a significant edge at lower and moderate income levels. At $60,000 in net income, it can shelter more than twice what a SEP IRA allows. For a direct plan comparison, see Solo 401(k) vs SEP IRA.

It also offers a Roth option on the employee deferral side and allows participant loans — features a SEP IRA doesn't have. The catch: the plan must be established by December 31, you need an EIN, and Form 5500-EZ is required once assets exceed $250,000. Available at Fidelity, Schwab, and Vanguard with no annual fees at the solo level.

SEP IRA vs. Solo 401(k): Which One Fits Your Situation?

The right plan depends on your net income, your filing deadline, and how much administrative overhead you're willing to manage. The full decision framework is at Solo 401(k) vs. SEP IRA.

How These Plans Reduce Your Tax Bill

All three plans allow pre-tax contributions that reduce your adjusted gross income on Schedule 1 of Form 1040. They don't reduce your self-employment tax base — that calculation happens separately — but they do lower your federal income tax bracket exposure dollar-for-dollar.

A Roth Solo 401(k) accepts after-tax contributions that grow and withdraw tax-free — worth considering if you expect higher tax rates in retirement. Full details on this option are in the Solo 401(k) guide.

When to Involve a CPA

For most solo freelancers with straightforward Schedule C income, you can open and fund a SEP IRA or Solo 401(k) on your own. Two situations call for professional guidance: if you have W-2 employees (or plan to hire), because your plan choice determines what you're required to contribute for them; and if your business operates as an S-corp, because the contribution calculation ties to your W-2 salary rather than Schedule C net — which changes both your contribution ceiling and your deduction treatment.

Start Here

Not sure which plan to open? Three questions narrow it down fast: How much is your net self-employment income this year? Did you miss December 31? Do you have any W-2 employees? Your answers point directly to a plan. For the contribution math on the SEP IRA, head to SEP IRA contribution limits. For the full Solo 401(k) rules and provider comparison, see the Solo 401(k) guide. For a direct plan-vs-plan decision framework, the Solo 401(k) vs. SEP IRA comparison walks through every scenario.