Planning for retirement as a self-employed person comes with unique challenges. Unlike traditional employees, you don’t have an employer to set up a 401(k) or match your contributions. That means it’s up to you to choose the best retirement account, maximize your savings, and ensure financial security for your future.
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The good news? Self-employed individuals have access to several powerful retirement savings accounts with high contribution limits, tax advantages, and flexibility. In this guide, we’ll explore the best retirement accounts for self-employed people in 2025, how they work, contribution limits, tax benefits, and strategies to maximize your savings.
Why Retirement Planning Is Crucial for the Self-Employed
When you’re self-employed, your income may fluctuate, and you may not have access to employer-sponsored benefits like pensions or 401(k) matching. This makes personal retirement planning even more important.
Key reasons self-employed people must prioritize retirement planning:
- No employer match → You must be your own matchmaker for savings.
- Income volatility → You’ll need a safety net for low-income years.
- Tax benefits → Retirement accounts help lower your taxable income.
- Wealth building → Compounding growth ensures financial independence.
Best Retirement Accounts for Self-Employed People
Let’s break down the top options available in 2025.
1. Solo 401(k)
A Solo 401(k) (also called an individual 401(k)) is designed for self-employed individuals with no employees (except a spouse). It’s one of the most powerful retirement savings tools because it allows you to contribute both as the employer and the employee.
Contribution Limits (2025):
- Employee contribution: Up to $23,000 (or $30,500 if age 50+).
- Employer contribution: Up to 25% of net self-employment income.
- Total maximum: $69,000 (or $76,500 with catch-up).
Tax Benefits:
- Contributions reduce taxable income.
- Option for Roth Solo 401(k) for tax-free withdrawals in retirement.
Pros:
- High contribution limits.
- Roth option available.
- You can borrow against it (loan option).
Cons:
- More paperwork than IRAs.
- If you hire employees, you may need a different plan.
Best for: High earners who want to maximize contributions.
2. SEP IRA (Simplified Employee Pension IRA)
A SEP IRA is one of the most popular retirement accounts for self-employed individuals and small business owners. It’s simple to set up and flexible with contributions.
Contribution Limits (2025):
- Up to 25% of net self-employment income.
- Maximum $69,000 in 2025.
Tax Benefits:
- Contributions are tax-deductible.
- Investments grow tax-deferred until retirement.
Pros:
- Easy to set up (through most brokers).
- High contribution limit.
- Flexible annual contributions (you don’t have to contribute every year).
Cons:
- No Roth option.
- If you have employees, you must contribute the same percentage for them.
Best for: Self-employed with fluctuating income who want flexibility.
3. SIMPLE IRA (Savings Incentive Match Plan for Employees)
The SIMPLE IRA is great for self-employed individuals with a few employees because it requires mandatory employer contributions.
Contribution Limits (2025):
- Employee contribution: Up to $16,000 ($19,500 if 50+).
- Employer contribution: Either 2% fixed contribution for all employees OR a 3% match.
Tax Benefits:
- Tax-deductible contributions.
- Tax-deferred growth.
Pros:
- Easy and affordable to administer.
- Encourages employees to save as well.
Cons:
- Lower contribution limits than SEP or Solo 401(k).
- Employer contributions are mandatory.
Best for: Small businesses with employees.
4. Traditional IRA
A Traditional IRA is available to anyone with earned income, including self-employed people. While the contribution limits are lower, it’s still a valuable retirement savings tool.
Contribution Limits (2025):
- $7,000 annually ($8,000 if 50+).
Tax Benefits:
- Contributions may be tax-deductible.
- Tax-deferred growth.
Pros:
- Easy to set up at any brokerage.
- Tax advantages for retirement.
Cons:
- Much lower contribution limits compared to self-employed-specific plans.
Best for: Self-employed with lower income or as a supplement to other plans.
5. Roth IRA
A Roth IRA allows after-tax contributions and tax-free withdrawals in retirement. It’s one of the best accounts for tax diversification.
Contribution Limits (2025):
- $7,000 annually ($8,000 if 50+).
- Income phase-out starts at $146,000 for single filers, $230,000 for married couples (2025 limits).
Tax Benefits:
- Contributions grow tax-free.
- Withdrawals in retirement are tax-free.
Pros:
- Tax-free retirement income.
- Flexible—withdraw contributions anytime without penalty.
Cons:
- Lower contribution limits.
- Income restrictions.
Best for: Self-employed who expect higher taxes in retirement.
6. Defined Benefit Plan
For very high-earning self-employed individuals, a Defined Benefit Plan (a personal pension plan) allows extremely high contributions—sometimes over $200,000 annually depending on age and income.
Contribution Limits (2025):
- Based on actuarial calculations (age, income, retirement age).
Tax Benefits:
- Contributions are tax-deductible.
- Provides predictable retirement income.
Pros:
- Huge contribution potential.
- Creates a pension-like income stream.
Cons:
- Expensive to set up and maintain.
- Requires consistent contributions.
Best for: High-income self-employed professionals (doctors, lawyers, consultants).
How to Choose the Best Retirement Account
When selecting the right plan, ask yourself:
- What is my income level?
- High income → Solo 401(k), SEP IRA, or Defined Benefit Plan.
- Moderate income → Traditional IRA or SIMPLE IRA.
- Low income → Roth IRA or Traditional IRA.
- Do I have employees?
- No → Solo 401(k) or SEP IRA.
- Yes → SIMPLE IRA or SEP IRA.
- Do I want tax savings now or later?
- Tax savings now → Traditional IRA, SEP IRA, Solo 401(k).
- Tax-free withdrawals later → Roth IRA or Roth Solo 401(k).
- Do I need flexibility?
- Irregular income → SEP IRA.
- Consistent income → Solo 401(k) or Defined Benefit Plan.
Strategies to Maximize Retirement Savings as Self-Employed
- Start early → Compounding works best with time.
- Diversify between Roth and Traditional → Balance taxes now and in retirement.
- Automate contributions → Set monthly transfers to your account.
- Increase contributions in high-income years → Take advantage of tax deductions.
- Consider multiple accounts → Example: Max Solo 401(k) and also contribute to a Roth IRA.
Common Mistakes to Avoid
- Waiting too long to start saving.
- Choosing an account without considering employees.
- Not taking advantage of Roth options.
- Forgetting about required minimum distributions (RMDs).
- Not working with a financial advisor for complex plans.
FAQs About Self-Employed Retirement Accounts
1. Can I have both a Solo 401(k) and a Roth IRA?
Yes, you can contribute to both as long as you meet income requirements.
2. Is a SEP IRA better than a Solo 401(k)?
It depends—SEP IRAs are simpler, but Solo 401(k)s allow higher contributions and Roth options.
3. What if my income changes year to year?
Choose flexible plans like SEP IRAs where contributions aren’t required annually.
4. Do freelancers qualify for these plans?
Yes! Freelancers, contractors, and gig workers can all set up self-employed retirement accounts.
5. Can I deduct my retirement contributions?
Yes—most contributions (except Roth) are tax-deductible.
Conclusion
Self-employed people have excellent retirement account options—it just takes planning to choose the right one. A Solo 401(k) is best for high earners with no employees, a SEP IRA works well for flexibility, a SIMPLE IRA is great for small businesses, and Traditional or Roth IRAs are perfect supplements. For top-tier earners, a Defined Benefit Plan may be the ultimate strategy.