Retirement plans for self-employed

Planning for retirement when you’re your own boss is key. You might not have a 401(k) from an employer. But, there are ways to save for the future. Having a retirement account not only helps you save but also has tax perks. Learn about five retirement plans if you work for yourself.

Traditional or Roth IRA

For the self-employed, there’s the choice of a traditional or Roth IRA. A $7,000 contribution limit for 2024 applies to both types, with a $1,000 “catch-up” if you’re 50 or older. Traditional IRAs cut your taxes now, while Roth IRAs let you pull money out tax-free in retirement. Think about your taxes and goals before picking one.

Solo 401(k)

The Solo 401(k) is for the self-employed, with no employees, besides a spouse. It allows up to $69,000 in contributions for 2024, with a $7,500 catch-up for those 50 or older. You can both employ and employee can save, which makes this plan powerful for saving.


The SEP IRA is good for solo businesses or those with employees. For 2024, you can stash away up to 25% of your pay or $69,000, whichever is less. Your business gets tax breaks and you save for retirement, including your team. It’s a win-win.


Consider the SIMPLE IRA if you have few employees or none. You can save up to $16,000 in 2024, with an extra $3,500 if you’re 50 or over. It’s an easy plan for small business owners, allowing both you and any employees to save.

Defined Benefit Plan

Looking to save big for retirement? A Defined Benefit Plan might be what you’re after. While you can contribute over $100,000 each year, the plan’s benefits are calculated based on your age and projected earnings. A financial advisor can help you see if this plan fits your retirement needs.

Keep an eye out for more. We’ll go deeper into each retirement plan. We’ll share info on picking the right savings plan. Plus, tips on how to get started with saving for retirement. Being self-employed doesn’t mean you can’t save for your future. Start saving now. Fidelity Investments recommends aiming to save 10 times your yearly pay by 67 for retirement.

Traditional or Roth IRA

You have two main choices for your retirement savings – Traditional IRA and Roth IRA. These plans help you save for your future while giving you tax benefits. They can be a key part of your retirement planning.

Let’s dive into the main differences between Traditional and Roth IRAs.

Traditional IRA

A key point of the Traditional IRA is it lets you put in pre-tax money. This means the amount you save lowers your taxable income for the year. Your savings can then grow without taxes until you retire.

But, you’ll pay taxes when you withdraw money in retirement. The hope is that by then, your tax rate is lower than it is today. This makes the plan smart for many.

Roth IRA

For the Roth IRA, you use money that’s already been taxed. Because of this, you don’t get a tax break right away. Yet, once the money is in, it grows without any tax. And in retirement, you can take it out tax-free.

This setup benefits those who might pay more taxes later in life. It’s a plus as your money can grow completely tax-free.

However, not everyone can use a Roth IRA. You must meet certain income limits. But, there are tricks like the Backdoor Roth IRA for those who earn more money.

Choosing the Right IRA for You

The right choice between Traditional and Roth IRAs depends on many things. Your income, taxes you expect to pay, and when you plan to retire are crucial. Consider these well before making a decision.

Getting advice from a financial pro who knows retirement planning is wise. They can cater advice to your needs. This makes your choice more tailored to you.

Comparing Contribution Limits

IRA Type Contribution Limit (2024) Catch-Up Contribution (Age 50+)
Traditional IRA $7,000 $1,000
Roth IRA $7,000 $1,000

Always remember, this info is just the basics. Talking to a financial expert is the best step for your retirement savings. They can help you make a plan that fits you perfectly.

Now, let’s discover another great option for retirement planning: the Solo 401(k).

Solo 401(k)

Solo 401(k)

The Solo 401(k) is great for those who work for themselves and want a solid retirement plan. It’s designed for solo workers, with no staff other than a spouse. It lets you save a lot due to high contribution limits and the ability to put in money both as an employer and an employee.

One big plus of the Solo 401(k) is how much you can put in. In 2024, you can add up to $23,000 if you’re the employee. If you’re 50 or older, you can add another $6,500 extra. This is a fantastic way to boost how much you save for your golden years.

As the boss, you can also add to your Solo 401(k). You can put in up to 25% of your pay as an employer along with your personal contributions. This way, you get a larger total savings amount for retirement.

But, there’s a limit to how much you can add in total each year. In 2024, the top dollar amount is $69,000, excluding extra catch-up money for those 50 and over. So you need to keep this cap in mind when adding up your contributions.

Figuring out how much you can put into a Solo 401(k) takes some special math. You need to work out the most you can put in as the worker and as the boss. This keeps you under the limit but still helps you save as much as possible for retirement.

Another thing to remember is filing a report every year. If your Solo 401(k) reaches $250,000 or more, you need to file Form 5500-EZ. This document confirms the health of your plan to the authorities.

Looking at retirement plans for solo workers, you’ve got options besides the Solo 401(k). SEP IRAs, Roth IRAs, and other plans might fit your needs better. It’s wise to check out all your choices before deciding.

Statistical Data related to Solo 401(k) for self-employed individuals
Average contribution amounts made by self-employed individuals into Solo 401(k) accounts
Percentage of self-employed individuals utilizing Solo 401(k) plans compared to other retirement options
Growth rate of Solo 401(k) adoption among freelancers and gig workers in recent years
Average rate of return on investments within Solo 401(k) accounts compared to traditional employer-sponsored plans
Percentage of self-employed individuals who have increased their retirement savings by switching to a Solo 401(k) plan
Number of self-employed individuals who have diversified their investment portfolio through Solo 401(k) plans
Average age of self-employed individuals who open Solo 401(k) accounts
Frequency of contributions made by self-employed individuals into Solo 401(k) plans during a fiscal year

The Solo 401(k) is a solid choice for self-employed folks wanting to save big for retirement. Talk to a financial advisor to see if it’s the right fit for your financial future.


The SEP IRA is a favorite among self-employed people and small business owners. It’s known for high contribution limits, easy management, and tax perks. This makes it a great option for saving for retirement.

You can put away up to 25% of your pay or net earnings if you’re self-employed. This means you can save a lot for your golden years. In 2022, you can stash up to $61,000. This goes up to $66,000 in 2023 due to adjustments for the cost of living.

This retirement plan is also super flexible. You don’t have to add money every year. You can put in funds whenever you can, which is good for those whose income changes often.

Benefits of a SEP IRA

  • High Contribution Limits: The SEP IRA lets you save more money than other plans for when you’re not working.
  • Simplified Administration: It’s easy to set up and look after a SEP IRA. There’s very little paperwork and no yearly reports to the IRS.
  • Tax Advantages: Putting money in a SEP IRA lowers your taxable income. This could mean paying less in taxes.

For business owners, SEP IRAs are good news. They can add to a SEP IRA and another retirement plan, doubling their savings. Plus, they might get a tax credit of up to $500 for the first three years of the SEP IRA’s life.

Remember, not everyone can use a SEP IRA. Workers must be 21, have worked for the employer for three of the last five years, and earn a certain amount. All employees must get the same amount of contributions, which might be hard for big businesses.

SEP IRAs do have their downsides, though. They don’t let you put in after-tax money like with a Roth IRA. That means you’ll pay taxes on the money you take out when you retire. And people 50 and older can’t make extra “catch-up” contributions like in some other plans.

Talk to a money expert before deciding on a SEP IRA. They can help you see if it’s right for you by looking at the tax breaks, how much you can contribute, and who can join. It’s all about making the best choice for your financial future.


self-employed retirement plans

The SIMPLE IRA is great for small business folks and their teams with up to 100 people. It mixes what both employees and employers put in. This team effort helps folks save up for the future.

Employers can either match what employees put in, up to 3% of their pay. Or, just add 2% to their pay, no strings attached.

For employees, you can put in up to $16,000 a year, with a little extra if you’re over 50. This makes a total allowed of $19,500 per year.

One big plus of a SIMPLE IRA is it helps lower your taxes. Everyone’s contributions can be taken off your taxes. Plus, employees own everything they put in right from the start.

However, SIMPLE IRAs let you save less money each year than some other plans. But they’re easy to start and keep going, which is good for small groups.

Now, let’s figure out the math of how much to contribute. Employers need to put in the same as they do for others on the team. They can match dollar-for-dollar up to 3% of their pay.

If not matching, employers must put in 2% of their pay, up to certain caps. These caps were $330,000 in 2023, $305,000 in 2022, and $290,000 in 2021.

Contributions must be made on time. Take out money from salaries in the first month after the year ends. And add the employer part by the tax return due date.

There are over 16 million self-employed people in the U.S. That’s about 10% of the country. The SIMPLE IRA is a key way for many of them to save for later.

Having a SIMPLE plan means not having another retirement plan for your team. But, small biz with up to 100 folks could get tax credits for the costs.

Compared to a solo 401(k), a SIMPLE IRA lets you save less. In 2024, you can put $16,000 in a SIMPLE IRA. But with a solo 401(k), the max is $69,000.

In short, the SIMPLE IRA is perfect for small groups and self-employed people. It uses both the team and tax breaks to help you save for the future easily.

Defined Benefit Plan

Defined Benefit Plan

A Defined Benefit Plan is a top choice for self-employed looking for more savings and big tax breaks. It’s better than a Solo 401(k) or SEP IRA for making bigger contributions.

With this plan, you can deduct contributions from taxes right away. However, you can’t put in more than $215,000 a year, set by the IRS in 2017. But, if you can afford to put in over $80,000 each year for five years, you’ll have a nice amount saved for retirement.

If you work over 1,000 hours a year, are older than 21, and have worked for a year or more, you can also join. Employers can use this plan to keep good employees happy, offering them a good retirement deal.

One big plus is the check you’ll get every month when you retire. You won’t worry about how your investments are doing. You’ll get a fixed check that’s figured out by how old you are, how much you earned, and how long you worked.

Comparison of Contribution Limits

Let’s look at how much you can put into different retirement savings if you’re self-employed:

Retirement Plan Contribution Limits
Defined Benefit Plan You can put in a lot more money than the Solo 401(k) or SEP IRA
Solo 401(k) You can put in up to $58,000 a year in 2021 ($64,500 if you’re 50 or older)
SEP IRA Your contribution can be up to 25% of what you earn or $58,000 in 2021, whichever is less

So, a Defined Benefit Plan lets you save much more than the Solo 401(k) or SEP IRA. This is good news for those who make a lot and want to ensure a comfortable retirement.

If you’re a self-employed professional like a lawyer, consultant, or doctor, a Defined Benefit Plan might be perfect. It lets you save more for retirement than a 401(k) or SEP-IRA. This means a bigger nest egg for your golden years.

Keep in mind, you must start a Defined Benefit Plan by your business’ tax filing day, often December 31. You have to put in contributions by the tax deadline or within 8½ months after your business year ends. So start planning now for a secure retirement with a Defined Benefit Plan.

Other Retirement Savings Options

retirement savings options

There are more ways to save for retirement. For self-employed people, these options can be very helpful. They allow for flexiblity and potential growth. This helps you create a retirement plan that suits your needs and dreams.

Individual Investment Accounts

Thinking about a brokerage account or mutual fund? It’s a smart choice for saving for retirement. These let you invest in many things like stocks and bonds. With the right planning, you can make your money work for you.

Guaranteed Income Annuities

Guaranteed income annuities give you a paycheck in retirement. When you get one, it pays out for life or a set time. This steady income means you can relax knowing your needs are covered.

Cash-Value Life Insurance Plans

Looking into whole life or universal life insurance? These offer protection and a way to save. The money you build up can be used during retirement. It’s a nice extra income or for any surprises.

It’s wise to look into these options carefully. Talk to a financial advisor for help. They can guide you to the best choices for your future. With their advice, you can mix retirement accounts and savings for the best outcome.

Key Considerations When Choosing a Retirement Plan

Choosing a retirement plan is key for self-employed folks. It’s vital to think through your options. Knowing what matters most will help you select wisely for your money goals and future.

1. Amount to Save for Retirement

Start by figuring out how much you need for the years you stop working. Think about your dreams, future costs, and when you want to retire. Then, you can see which plan lets you save enough to be sure about your financial later.

2. Affordability of Contributions

It’s also very crucial to think about what you can pay into the plan. Different plans have different top contributions you can make. You need to pick a plan that lets you save well without giving up on your daily needs.

3. Employee Eligibility

Planning on having your own employees? If yes, you might need a plan that includes them, like SEP IRA. It mandates equal pay-ins for all who are qualified. So, choosing the right plan is also about being ready for business growth and your duties as an employer.

4. Contribution Limits

Each plan limits how much you can put in every year. Make sure you know these limits to match with your savings aims. For instance, in 2023, Solo 401(k) lets you contribute up to 25% of your pay or $66,000. If you’re over 50, the limit goes up to $73,500.

5. Administrative Complexity

Think about how much work it will take to run the plan. Plans like Solo 401(k) might need more paperwork, especially if you have a lot saved. Make sure you can handle the extra work and that it won’t stress you out.

Getting Started with Retirement Planning

Retirement planning is key for self-employed people to make their future safe. It’s a big task but can be broken down into steps.

Start by talking with experts in finance and tax. They understand what self-employed folks need for retirement. They will guide you in choosing the right plans and investments.

Then, figure out how much money you’ll want each month in retirement. A financial advisor can help with this. They will use your income and age to make a plan.

After that, create a detailed retirement plan just for you. Include how much you can put into savings from your business. Look into options like SEP IRAs and Solo 401(k)s.

Always check your plan and change it as needed. Your business and goals might shift, so adapting is key. Staying on top of saving for retirement will pay off.

Starting early and getting expert help leads to a bright retirement. You’ll be ready for a happy and worry-free later life.

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