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Self-Employed Retirement Plans: Options to Save for Your Future

If you’re self-employed, congratulations—you’re the boss! But with great freedom comes great responsibility, especially when planning for retirement. Unlike your traditionally employed counterparts, you don’t have an HR department handing you a glossy brochure about a 401(k). 

The good news? You have plenty of retirement plan options that are not only flexible but can also save you a bundle in taxes. Let’s explore your choices.

Traditional and Roth IRAs

Individual retirement accounts (IRAs) are retirement staples available to almost everyone, including the self-employed. While contribution limits are lower, they’re a good option if you’re just starting out and don’t have much money to save just yet. They’re also perfect for supplementing other retirement savings.

  • Contribution limits (2024 and 2025): $7,000 (or $8,000 if you’re 50 or older)
  • Contribution deadline: The filing deadline for your tax return, not including extensions

IRA tax perks

Contributions to a traditional IRA may be tax deductible, depending on whether you have access to another employer-sponsored retirement plan and your modified adjusted gross income (MAGI).

Contributions to a Roth IRA are not tax deductible, but withdrawals are tax-free in retirement. However, income limits apply for Roth IRAs, so check the latest IRS guidelines.

SIMPLE IRA

The Savings Incentive Match Plan for Employees (SIMPLE IRA) is an excellent choice if you have a small business with a handful of employees—or if you plan to expand. It’s available to small businesses with 100 or fewer employees.

  • Employee contribution limit: Up to $16,000 for 2024 or $16,500 for 2025 (plus an extra $3,500 for participants 50 and older or $5,250 for employees aged 60 through 63)
  • Employer match: Small business owners must either match contributions dollar-for-dollar (up to 3% of compensation) or contribute 2% of earnings for all eligible employees
  • Contribution deadline: You must deposit employee withholdings within 30 days after the end of the month. You must make employer contributions (either matching or non-elective) by the due date of the business’s federal income tax return, including extensions.

SIMPLE IRA perks

As the same implies, the allure of a SIMPLE IRA lies in its simplicity. They’re easy to set up and maintain, and employers don’t have to file annual tax returns for the plan.

SEP IRA

The Simplified Employee Pension (SEP) IRA is a popular choice for self-employed people because it’s straightforward but allows for substantial contributions.

  • Annual contribution limits: The lesser of 25% of your net earnings or $69,000 for 2024 ($70,000 for 2025)
  • Contribution deadline: You must establish a SEP IRA and make any contributions to the plan by the due date of the sponsoring business’s income tax return for that year, including extensions.

SEP IRA benefits

A SEP IRA is a flexible choice for self-employed people because contributions are optional, meaning you can scale back in lean years.

Contributions are tax-deductible, and earnings grow tax-deferred.

Solo 401(k)

If you’ve got dreams of turbocharging your retirement savings, a Solo 401(k) might be a good option. Designed specifically for self-employed people with no employees (aside from a spouse), this plan lets you contribute as both employer and employee.

  • Employee contribution limits: Up to $23,000 for 2024 and up to $23,500 for 2025. If you’re age 50 or older, you can contribute an extra $7,500 in catch-up contributions.
  • Employer contributions: You can also contribute up to 25% of compensation (after Social Security and Medicare) for the employer contributions. The IRS limits the amount of compensation you can use to determine profit-sharing contributions to $345,000 for 2024 and $350,000 for 2025.
  • Contribution deadline: You must make the employee portion of contributions by December 31 and the employer portion by the business tax filing deadline, including extensions.

What to know about a Solo 401(k)

Contributions reduce your taxable income, and your investments grow tax-deferred. Also, some Solo 401(k) plans offer a Roth component, letting you make after-tax contributions and enjoy tax-free withdrawals in retirement.

Still, a Solo 401(k) isn’t for everyone. If your plan balance exceeds $250,000, you may have to file tax form 5500-EZ with the IRS.

If you don’t have any employees (other than a spouse), your Solo 401(k) plan isn’t subject to the non-discrimination testing required by standard 401(k) plans. However, if you hire any full-time or long-term part-time employees, you must convert your Solo 401(k) to a full 401(k) plan and provide benefits to employees or terminate the plan and roll over your savings to an IRA.

Defined benefit plans

A defined benefit plan might be the way to go if your income is consistently high and you want to sock away serious cash. This is essentially a self-funded pension plan where you determine the benefit you’ll receive in retirement, and your contributions adjust accordingly.

  • Contribution limits: Based on your age, income, and desired benefit—often much higher than other plans. The annual benefit cannot exceed the lesser of 100% of the participant’s average compensation for their highest consecutive calendar years or $275,000 for 2024 ($280,000 for 2025).
  • Contribution deadline: For calendar-year plans, you must make your contribution before you file your business tax return for that calendar year, but no later than September 15 of the following year.

What to know about defined benefit plans

Only the employer contributes to a defined benefit plan and required annual contributions are based on the participant’s age. This makes defined benefit plans ideal for self-employed people with no employees or those with only a few younger employees because small business owners can funnel more tax-deductible contributions to their own retirement accounts.

However, these plans require a higher level of commitment and administration. You must have an actuary calculate the benefits annually, comply with strict Employee Retirement Income Security Act (ERISA) funding rules, and file Form 5500 with the IRS and the Department of Labor (DOL) each year.

Health Savings Account (HSA)

While not technically part of the self-employed retirement plans club, an HSA can double as one. If you’re enrolled in a high-deductible health plan, you can save for medical expenses while letting your contributions grow tax-free.

  • Contribution limits: $4,150 for individuals or $8,300 for families in 2024. For 2025, you can contribute up to $4,300 for individuals or $8,500 for families. People age 55 and up can contribute an additional $1,000.
  • Contribution deadline: You generally have until your individual tax filing deadline (April 15th) to contribute to an HSA.

HSAs offer triple tax benefits, meaning contributions qualify for a tax deduction, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.

After age 65, you can use your HSA for non-medical expenses without penalties—though withdrawals will be taxed like a Traditional IRA.

How to choose the right self-employed retirement plans

Selecting a retirement plan depends on your income, future goals, and how much complexity you can handle. Here are some quick questions to guide you:

  • How much do you want to save each year?
  • Do you prefer upfront tax savings (Traditional/SEP IRA) or tax-free withdrawals (Roth)?
  • Can you handle the administrative requirements of plans like the Solo 401(k) or defined benefit plan?

Being self-employed means you’re in charge of your future, including your retirement. With so many great options, there’s no excuse to let your golden years be an afterthought. Whether you want to keep it simple with a traditional or Roth IRA or aim high with a Solo 401(k), there’s a plan that fits your needs.

If you need help choosing, reach out. Your future self will thank you.

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