What is the best retirement plan for freelancers?

For most one-person businesses the Solo 401(k) is the best retirement plan because it lets you contribute as both employee and employer, allows much larger contributions at lower income levels, offers a Roth option, and permits loans. A SEP-IRA is the better choice if you want zero paperwork, may add employees later, or are funding the account after year-end. A SIMPLE IRA suits very low or irregular income.

What is the difference between a SEP-IRA and a Solo 401(k)?

A SEP-IRA only allows employer (profit-sharing) contributions of up to 25% of compensation, while a Solo 401(k) adds a separate employee deferral on top of that, so you can contribute far more at moderate incomes. The Solo 401(k) also offers Roth contributions, catch-up amounts for those 50+, and loans, but it requires more paperwork and a separate plan for any W-2 employees. The SEP-IRA is simpler and can be opened and funded up to the tax-filing deadline.

What are the self-employed 401(k) contribution limits for 2026?

For 2026 the employee deferral limit for a Solo 401(k) is expected to be about $24,500 (the 2025 figure, indexed for inflation), plus an employer profit-sharing contribution of up to 25% of net self-employment compensation. The combined employee-plus-employer cap is expected to be roughly $72,000, or about $80,000 for those age 50 and over with the catch-up. Always confirm the final indexed numbers on IRS.gov before contributing.

Can I have a SEP-IRA and a Solo 401(k) at the same time?

You can technically have both, but the employer-side contributions share a single combined limit, so opening two plans rarely lets you contribute more. Most freelancers pick one. If you already funded a SEP-IRA and want the higher contributions of a Solo 401(k), it is usually cleaner to roll the SEP balance into the Solo 401(k) and use only the Solo 401(k) going forward.

Should I choose a Roth or traditional self-employed retirement account?

Choose traditional (pre-tax) if you are in a high tax bracket now and expect a lower bracket in retirement — you get the deduction today. Choose Roth if you expect higher future taxes, have a low-income year, or want tax-free growth and no required minimum distributions. A Roth Solo 401(k) lets you make large Roth contributions that a Roth IRA's low limit and income caps would otherwise block. Many freelancers split contributions between both.

When is the deadline to open and fund a self-employed retirement plan?

A SEP-IRA can be both opened and funded up to your tax-filing deadline including extensions (so as late as October for a calendar-year filer who extends). A Solo 401(k) must be established by December 31 of the tax year to make employee deferrals, though employer contributions and, under SECURE 2.0, the plan itself can in some cases be set up by the filing deadline. Confirm timing with your plan provider.

Home / Guides / Retirement Plans

Retirement Plans for the Self-Employed

No company 401(k) match doesn’t mean no retirement — freelancers actually get some of the most generous tax-advantaged accounts available. Here’s how SEP-IRAs and Solo 401(k)s stack up.

When you work for yourself, nobody automatically enrolls you in a plan or drops a match into your account. That sounds like a disadvantage, but the trade is genuinely good: as a self-employed person you wear two hats — employee and employer — and the tax code lets both of them contribute. The result is that a solo freelancer can shelter far more income from tax than a typical W-2 employee whose only lever is a $24,500 deferral.

The catch is that you have to set the account up, choose the right one, and fund it yourself before the deadline. This guide walks through the three plans that matter for the self-employed in 2026 — the SEP-IRA, the Solo 401(k), and the SIMPLE IRA — with real numbers, a side-by-side table, and a clear decision framework.

Why retirement contributions are a freelancer’s best tax move

Every dollar you put into a traditional self-employed retirement account is a dollar that comes off your taxable income today. If you’re a freelancer netting $90,000 and you’re in the 24% federal bracket, a $20,000 pre-tax contribution can cut your federal tax bill by roughly $4,800 — before state tax. That money then grows tax-deferred for decades.

It stacks on top of two other moves freelancers already make: the deduction for one-half of self-employment tax, and the 20% Qualified Business Income (QBI) deduction (where it applies). Retirement contributions are the single largest legal lever most solo operators have to lower an income tax bill, which is exactly why advisors push them so hard.

The three plans that matter in 2026

1. SEP-IRA — the simplest big account

A Simplified Employee Pension IRA is the no-fuss option. There’s essentially no annual paperwork, you can open one at any major brokerage in minutes, and you can both open and fund it up to your tax-filing deadline, including extensions — meaning you can still make a prior-year contribution in October. That last point is huge if you’re reading this after December 31.

Contributions: employer-only, up to 25% of net self-employment compensation (after the SE-tax adjustment, the effective rate works out to about 20% of net profit).
2026 cap: expected to be around $72,000 (the limit is indexed; confirm the final figure on IRS.gov).
No catch-up for those 50+, and historically no Roth option (SECURE 2.0 created a Roth SEP path, but provider support is still spotty — check before relying on it).
Employees: if you ever hire, you generally must contribute the same percentage of pay for every eligible employee — which gets expensive fast.

2. Solo 401(k) — the most powerful for one-person shops

Also called an Individual 401(k) or i401(k), this is the heavyweight. Because you contribute as both employee and employer, you reach the same ceiling as a SEP-IRA at a much lower income, and you get features a SEP can’t match.

Employee deferral (2026, expected): ~$24,500 — this is a flat dollar amount you can contribute regardless of how it compares to your profit.
Employer profit-sharing: up to 25% of compensation on top of the deferral.
Combined cap (2026, expected): ~$72,000, or ~$80,000 if you’re 50+ with the catch-up.
Roth option: yes — you can route the employee deferral (and, under SECURE 2.0, employer contributions) into a Roth bucket for tax-free growth.
Loans: you can typically borrow up to 50% of the balance (max $50,000).
Catch-tip: only the freelancer and a spouse who works in the business can participate. Hire a non-spouse W-2 employee and you generally lose Solo 401(k) eligibility.

3. SIMPLE IRA — for lower or lumpy income

A SIMPLE IRA has lower limits (a ~$16,500-range employee deferral for 2026, plus a small employer match), but it’s easy to run and can make sense if your net income is modest or unpredictable and you wouldn’t come close to the SEP/Solo ceilings anyway. For most full-time freelancers it’s a distant third.

SEP-IRA vs Solo 401(k): side-by-side (2026)

Feature	SEP-IRA	Solo 401(k)
Who contributes	Employer only	Employee + employer
Employee deferral	None	~$24,500
Employer share	Up to 25% of comp	Up to 25% of comp
Combined cap (under 50)	~$72,000	~$72,000
Age 50+ catch-up	No	Yes (~$80,000 total)
Roth option	Limited / new	Yes
Loans allowed	No	Yes (up to $50k)
Paperwork	Almost none	Form 5500-EZ once over $250k
Open/fund after year-end	Yes, to filing deadline	Plan generally by Dec 31
Best for	Set-and-forget, late filers, possible future hires	Maximizing contributions, Roth access, one-person shops

All 2026 dollar figures are projected/indexed estimates. Verify the official numbers on IRS.gov before you contribute.

The math that makes the Solo 401(k) win at lower incomes

This is the part most freelancers miss. Because the SEP-IRA caps you at ~25% of compensation, a moderate earner can’t get near the big ceiling. The Solo 401(k)’s flat employee deferral fixes that.

Example — $60,000 net profit:

SEP-IRA: roughly 20% of net (after the SE-tax adjustment) ≈ ~$11,000 you can contribute.
Solo 401(k): the same ~$11,000 employer piece plus up to the full ~$24,500 employee deferral ≈ ~$35,000+ sheltered.

That’s three times the tax-advantaged saving on identical income. The two plans only converge once your profit is high enough (roughly the high-$200,000s) that the 25% employer formula alone hits the combined cap. Below that, the Solo 401(k) almost always lets you save more.

How to choose: a quick decision tree

Will you stay a one-person (or spouse-only) business? If yes and you want to maximize savings or want Roth access → Solo 401(k).
Might you hire W-2 employees soon? A SEP scales to a team more cleanly → lean SEP-IRA (or revisit a group 401(k) later).
Are you reading this after year-end and want a prior-year deduction? The SEP can still be opened and funded → SEP-IRA.
Is your income modest or irregular? Consider a SIMPLE IRA or simply max a Roth IRA (~$7,000) first.

Don’t forget the IRA layer underneath

A SEP or Solo 401(k) does not use up your personal IRA contribution room. In 2026 you can still put roughly $7,000 ($8,000 if 50+) into a Roth or Traditional IRA on top of your business plan, subject to income limits. Many freelancers do exactly this: Solo 401(k) for the bulk, plus a Roth IRA (or a backdoor Roth if income is high) for tax-free diversification.

Practical setup checklist

Get an EIN (free from the IRS) if you don’t have one — most Solo 401(k) providers require it.
Pick a low-cost provider (Fidelity, Schwab, Vanguard, or a Roth-and-loan-friendly specialist). Watch for plan fees.
Open the account before the deadline — Dec 31 for Solo 401(k) deferrals, filing deadline for SEP.
Calculate your contribution from net profit, not gross revenue, after the half-of-SE-tax adjustment.
Automate quarterly transfers so a single year-end cash crunch doesn’t blow up your plan.

Figure out how much spare cash your rate actually leaves for retirement before you commit to a contribution target — that’s where a quick allocation pass pays off.

Run the numbers

See how much of every invoice you can route to retirement — use the Profit-First allocator to carve out a savings slice, then check your True Rate covers it.

Profit-First allocator → True-Rate Calculator →

Frequently asked questions

What is the best retirement plan for freelancers?: For most one-person businesses the Solo 401(k) is the best retirement plan because it lets you contribute as both employee and employer, allows much larger contributions at lower income levels, offers a Roth option, and permits loans. A SEP-IRA is the better choice if you want zero paperwork, may add employees later, or are funding the account after year-end. A SIMPLE IRA suits very low or irregular income.
What is the difference between a SEP-IRA and a Solo 401(k)?: A SEP-IRA only allows employer (profit-sharing) contributions of up to 25% of compensation, while a Solo 401(k) adds a separate employee deferral on top of that, so you can contribute far more at moderate incomes. The Solo 401(k) also offers Roth contributions, catch-up amounts for those 50+, and loans, but it requires more paperwork and a separate plan for any W-2 employees. The SEP-IRA is simpler and can be opened and funded up to the tax-filing deadline.
What are the self-employed 401(k) contribution limits for 2026?: For 2026 the employee deferral limit for a Solo 401(k) is expected to be about $24,500 (the 2025 figure, indexed for inflation), plus an employer profit-sharing contribution of up to 25% of net self-employment compensation. The combined employee-plus-employer cap is expected to be roughly $72,000, or about $80,000 for those age 50 and over with the catch-up. Always confirm the final indexed numbers on IRS.gov before contributing.
Can I have a SEP-IRA and a Solo 401(k) at the same time?: You can technically have both, but the employer-side contributions share a single combined limit, so opening two plans rarely lets you contribute more. Most freelancers pick one. If you already funded a SEP-IRA and want the higher contributions of a Solo 401(k), it is usually cleaner to roll the SEP balance into the Solo 401(k) and use only the Solo 401(k) going forward.
Should I choose a Roth or traditional self-employed retirement account?: Choose traditional (pre-tax) if you are in a high tax bracket now and expect a lower bracket in retirement — you get the deduction today. Choose Roth if you expect higher future taxes, have a low-income year, or want tax-free growth and no required minimum distributions. A Roth Solo 401(k) lets you make large Roth contributions that a Roth IRA’s low limit and income caps would otherwise block. Many freelancers split contributions between both.
When is the deadline to open and fund a self-employed retirement plan?: A SEP-IRA can be both opened and funded up to your tax-filing deadline including extensions (so as late as October for a calendar-year filer who extends). A Solo 401(k) must be established by December 31 of the tax year to make employee deferrals, though employer contributions and, under SECURE 2.0, the plan itself can in some cases be set up by the filing deadline. Confirm timing with your plan provider.

This is general information for 2026, not tax, legal, or financial advice — contribution limits are indexed and may change, so confirm the current-year figures and your eligibility with a qualified advisor or IRS.gov before contributing.