How to Plan for Retirement if You’re Self-Employed

Self-employment comes with freedom, flexibility, and the ability to build your own future. But one major challenge? Retirement planning. Without an employer-sponsored 401(k), it's up to you to create and maintain your own nest egg. The good news: there are powerful tools available—you just need to know how to use them.

In this guide, we’ll break down the most suitable retirement plans for self-employed individuals, including a comparison of SEP IRA vs Solo 401(k), so you can choose the right path for your goals.

Why Retirement Planning Matters When You’re Self-Employed

When you work for yourself, there’s no automatic payroll deduction or company match. If you don’t take action, no one else will. That makes intentional planning even more essential.

Retirement accounts offer three big advantages:

● Tax savings (now or later)

● Compound growth over time

● A disciplined way to invest for the future

By choosing the most suitable retirement account for self-employed workers, you can potentially reduce your tax burden and build long-term financial independence.

Want to understand how these strategies fit into a personalized retirement plan? See how Sage Hills Financial approaches retirement planning.

The Most Suitable Retirement Plans for Self-Employed Individuals

There are three primary options worth considering:

1. SEP IRA (Simplified Employee Pension)

A SEP IRA is easy to set up and allows high contribution limits. It works well for solo business owners or those with just a few employees.

● Contribution limit: Up to 25% of net earnings from self-employment, up to a cap

($69,000 in 2024)

● Tax advantage: Contributions are tax-deductible

● Flexibility: You aren’t required to contribute every year

● Employee rule: If you have employees, you must contribute equally for them

Suitable for: Simplicity and business owners without employees (or those willing to contribute equally for staff)

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

A Solo 401(k) is designed specifically for self-employed individuals with no employees (except a spouse). It allows for both employer and employee contributions, which can mean more savings.

● Contribution limit: Up to $23,000 as employee deferral (plus $7,500 catch-up if over

50) and up to 25% of earnings as employer

● Higher total limit: Potentially more than a SEP IRA for the same income level

● Roth option: Some Solo 401(k)s allow for Roth (after-tax) contributions

● Loan provisions: You may be able to borrow from the plan

Suitable for: High earners, those wanting Roth contributions or maximum savings potential

SEP IRA vs Solo 401(k): Which Is Better?

When comparing Solo 401(k) vs SEP IRA, the right choice depends on your income level,

business structure, and whether you want Roth options or the ability to borrow.

Choosing the Most Suitable Retirement Account for Self-Employed Workers

Ask yourself these questions:

● Do I want to make Roth (after-tax) contributions?

● Will I need to borrow from my retirement funds?

● Do I have employees?

● How much do I want to save each year?

If you’re looking for simplicity, a SEP IRA might be the most suitable fit. If you want to contribute more and take advantage of Roth options, a Solo 401(k) could be the way to go.

Next Steps: Set Up Your Retirement Plan Today

Ready to get started? Setting up a SEP IRA or Solo 401(k) can be done through most

brokerage firms, often with low or no setup fees. But choosing the right plan and contribution strategy can make a big difference in your long-term wealth.

If you're unsure which plan is right for you, working with a financial planner can help you tailor your retirement savings to your income, taxes, and future goals. Let’s build your self-employed retirement strategy together.

Schedule A Meeting

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.