Retirement: Navigating Self-Employed Plan Options

Aug 6

TL;DR:

Self-employed? You can access powerful retirement plans with higher contribution limits.
Top options include SEP IRA, SIMPLE IRA, and Solo 401(k).
Choosing the right one depends on income, number of employees, and how much flexibility you want.

Why This Matters

When you're your own boss, you don’t get a 401(k) automatically handed to you—but that doesn't mean you're out of luck. In fact, self-employed folks can access some of the most flexible and high-contribution retirement plans out there.

These plans don’t just help you save for retirement—they also reduce your taxable income today. Which means more money working for you and less going to the IRS. These plans can also let you max out far about levels available to W2 employees.

Let’s walk through the big three: SEP IRA, SIMPLE IRA, and Solo 401(k).

1. SEP IRA (Simplified Employee Pension)

Best for: Freelancers, sole proprietors, or business owners with few or no employees.

Contribution limit: Up to 25% of compensation, maxing out at $69,000 for 2024.
Tax treatment: Contributions are tax-deductible. Grows tax-deferred. Taxes paid upon withdrawal.
Employee requirements: If you contribute for yourself, you must also contribute the same percentage for eligible employees.
Setup: Very easy and low cost.

Why people like it: High contribution limits + simple setup. Just know you can’t make Roth contributions and you’ll have less flexibility on how mu

2. Solo 401(k) (a.k.a. Individual 401(k))

Best for: Solo entrepreneurs or partnerships with no employees (except maybe a spouse).

Contribution limit: Up to $23,000 in employee deferrals + 25% of compensation as employer, up to $69,000 total for 2024 ($76,500 with catch-up if 50+).
Tax treatment: Traditional (pre-tax) or Roth options available.
RMDs: Required at age 73 unless Roth.
Setup: More complex and involves some paperwork, especially once your account exceeds $250,000 (you’ll need to file Form 5500).

Why people like it: Highest flexibility and contribution potential. You can contribute both as employee and employer. Roth option is a big plus.

ch you can put in year-to-year compared to a Solo 401(k).

3. SIMPLE IRA (Savings Incentive Match Plan for Employees)

Best for: Small businesses with up to 100 employees.

Contribution limit: Up to $16,000 in employee deferrals (2024), plus a $3,500 catch-up if 50+.
Employer match: You must either match up to 3% of compensation or make a 2% nonelective contribution for all employees.
Tax treatment: Contributions are pre-tax. Taxes paid on withdrawals.
Setup: Easy and low-cost, but requires more employee communication than a SEP.

Why people like it: Encourages savings among employees, but less popular for solo operators because of lower contribution limits.

Choosing the Right Plan

Ask yourself:

Do I have employees?
Do I want to make Roth contributions?
How much do I want to contribute annually?
Do I want something simple or am I okay with some admin work for better benefits?

If you're solo with high income and want maximum contributions + Roth flexibility, Solo 401(k) often wins.

If you want super easy setup and no employees, SEP IRA is a solid bet.

If you run a small team and want something with a built-in match, SIMPLE IRA is worth a look.

What to do next:

Estimate your income and how much you’d like to save.
Consider your team size and growth plans.
Decide if you want pre-tax or Roth treatment.
Talk to your financial advisor or tax pro—they can help you pick the best fit and handle setup.

Being self-employed means more responsibility—but also more freedom to build the retirement you want. Start now and give your future self some serious options.

William Cole