Best Retirement Plans for Self-Employed and Freelance Workers

When you work for yourself, nobody is

When you work for yourself, nobody is automatically withholding retirement contributions or offering an employer match. Without intentional planning, it is easy to reach your 50s or 60s with minimal retirement savings despite earning good income throughout your career.

The silver lining: self-employed retirement plans often have higher contribution limits than employee plans, and every dollar you contribute reduces your self-employment tax burden. A freelancer earning $150,000 who contributes $40,000 to a Solo 401(k) reduces their taxable income to $110,000 — saving roughly $10,000 in federal income tax alone.

The key is choosing the right plan for your situation and making contributions consistently, even when income fluctuates.

Contribution limits (2025)

The Solo 401(k), also called an individual 401(k) or one-participant 401(k), is the most flexible and generous retirement plan for self-employed individuals with no full-time employees (a spouse who works in the business can participate).

Contribution limits (2025): You can contribute as both employee and employer. As the employee, you can defer up to $23,500 (or $31,000 if over 50). As the employer, you can contribute up to 25% of your net self-employment income. The combined total cannot exceed $69,000 ($76,500 if over 50).

Roth option available: Many Solo 401(k) providers offer a Roth sub-account, letting you make after-tax contributions that grow tax-free. This is a major advantage over SEP IRAs, which are always pre-tax.

Loan provision: Solo 401(k)s can include a loan feature, allowing you to borrow up to $50,000 or 50% of the balance from your own retirement funds. This provides emergency liquidity without taxes or penalties.

Setup and administration: You must establish the plan by December 31 to make contributions for that tax year (though you can fund it until your filing deadline). There is minimal paperwork until the account exceeds $250,000, at which point you file IRS Form 5500-EZ annually.

Contribution limits (2025)

A Simplified Employee Pension (SEP) IRA is the easiest self-employed retirement plan to set up and maintain, making it popular with freelancers who want simplicity.

Contribution limits (2025): Up to 25% of net self-employment income, with a maximum of $69,000. For sole proprietors, net self-employment income is calculated after deducting half of self-employment tax, which effectively limits contributions to about 20% of gross self-employment income.

Key advantage — simplicity: You can open a SEP IRA in minutes at any major brokerage, there are no annual filings, and you can decide how much to contribute (including zero) each year with no commitment.

Key advantage — deadline flexibility: You can establish and fund a SEP IRA up to your tax filing deadline, including extensions. If you file an extension to October 15, you have until then to open and fund the account for the prior tax year.

Limitations: No Roth option, no loan provision, and no employee contribution (only employer contributions). If you have employees, you must contribute the same percentage of compensation for all eligible employees — which gets expensive quickly.

Contribution limits (2025)

The Savings Incentive Match Plan for Employees (SIMPLE) IRA is designed for businesses with 100 or fewer employees. It is simpler to administer than a traditional 401(k) but has lower contribution limits.

Contribution limits (2025): Employees (including you) can defer up to $16,500 ($20,000 if over 50). The employer must either match employee contributions dollar-for-dollar up to 3% of compensation, or make a 2% non-elective contribution for all eligible employees.

Best for: Small business owners with a few employees who want to offer retirement benefits without the complexity and cost of a full 401(k) plan. Setup costs are minimal and there are no annual filing requirements.

Limitations: Lower contribution limits than Solo 401(k) or SEP IRA. No Roth option (though this may change with SECURE 2.0 implementation). Withdrawals within the first 2 years of participation face a 25% early withdrawal penalty instead of the usual 10%.

2025 limits

In addition to any self-employed plan, you can also contribute to a traditional or Roth IRA (assuming you meet the income requirements for deductible traditional or direct Roth contributions).

2025 limits: $7,000 per year ($8,000 if over 50) for traditional or Roth IRA contributions. These are in addition to your Solo 401(k) or SEP IRA contributions.

Strategy: Max out your self-employed plan first (higher limits and immediate tax deduction), then contribute to a Roth IRA for tax diversification. Having both pre-tax and Roth accounts in retirement gives you flexibility to manage your tax bracket year by year.

If your income is too high for direct Roth IRA contributions ($161,000 single, $240,000 married in 2025), consider the backdoor Roth strategy — contribute to a non-deductible traditional IRA, then convert to Roth. This works cleanly if you do not have other traditional IRA balances (beware the pro-rata rule).

Choose a Solo 401(k) if

Choose a Solo 401(k) if: You have no employees (other than a spouse), you want the highest possible contribution limits, you want a Roth option, or you might need to borrow from your retirement funds.

Choose a SEP IRA if: You want the absolute simplest setup, you are starting late in the year and need to establish a plan quickly, your income varies significantly and you want full flexibility on contributions, or you are just getting started with self-employed retirement planning.

Choose a SIMPLE IRA if: You have employees and want to offer them retirement benefits with minimal administrative burden and cost.

Can you switch later? Yes. You can convert a SEP IRA to a Solo 401(k) by establishing the Solo 401(k) and rolling the SEP IRA into it. Many freelancers start with a SEP for simplicity and upgrade to a Solo 401(k) when their income grows and they want higher contribution limits or a Roth option.