How to Choose the Best Retirement Plan for Self-Employed People
Planning for retirement is a vital part of securing your financial future, especially if you're self-employed.
Without access to employer-sponsored plans, you need to take charge and find the best retirement solution tailored to your business structure and income.
Fortunately, there are several tax-advantaged options designed specifically for entrepreneurs, freelancers, and independent contractors.
Table of Contents
- Traditional & Roth IRAs
- SEP IRA
- Solo 401(k)
- SIMPLE IRA
- Defined Benefit Plan
- How to Choose the Right Plan
Traditional & Roth IRAs
IRAs are among the easiest retirement plans to open and manage, even if you work for yourself.
In 2025, you can contribute up to $7,000 annually, or $8,000 if you're 50 or older.
Traditional IRAs offer tax-deductible contributions and taxable withdrawals, while Roth IRAs provide tax-free withdrawals in retirement.
Roth IRAs have income limits; if you earn more than $165,000 (single filers), you may be ineligible to contribute directly.
SEP IRA
A Simplified Employee Pension IRA (SEP IRA) is ideal for self-employed people with no or few employees.
For 2025, you can contribute up to 25% of your net earnings or $69,000, whichever is less.
It’s easy to set up and requires minimal paperwork compared to other options.
However, if you hire employees, you must contribute the same percentage of their income to their SEP IRA as you do for yourself.
Solo 401(k)
If you're a one-person business or work with your spouse, Solo 401(k) could offer the highest contribution limits.
In 2025, you can contribute $23,500 as an employee, and up to 25% of your net earnings as the employer—capped at $69,000.
You can also make Roth contributions and take out loans from the plan, depending on the provider.
Once the plan reaches $250,000 in assets, you’ll need to file IRS Form 5500-EZ annually.
SIMPLE IRA
For self-employed individuals with fewer than 100 employees, a SIMPLE IRA can be a practical option.
In 2025, you can contribute up to $16,000, with an additional $3,500 for those aged 50+.
Employers must either match up to 3% of compensation or make a 2% nonelective contribution for all employees.
It’s easier to administer than a 401(k), but lacks a Roth option and loan flexibility.
Defined Benefit Plan
Want a predictable income stream in retirement? A defined benefit plan, similar to a pension, might be worth considering.
This plan allows you to contribute much higher amounts annually based on your age, income, and years to retirement.
It’s best for high earners looking to contribute hundreds of thousands of dollars yearly.
However, it’s expensive to maintain and involves actuarial calculations and mandatory annual contributions.
How to Choose the Right Plan
Here are some questions to help guide your decision:
- Do you have employees? A SEP or SIMPLE IRA may work better than a Solo 401(k).
- Do you want Roth options or loan access? Solo 401(k) has more flexibility.
- Is maximizing contributions your goal? Consider a defined benefit plan.
- Are you just getting started? A Traditional or Roth IRA is easy and effective.
Your choice should depend on your income level, business size, and administrative comfort.
📌 Learn More About Self-Employed Retirement Options
Check out this detailed guide for more info and examples:
📘 Read the Full Self-Employed Retirement GuideChoosing the best retirement plan as a self-employed person doesn’t need to be overwhelming.
With the right research and some professional advice, you can secure your financial future while optimizing tax benefits today.
Keep your income goals and business structure in mind as you choose the plan that’s right for you.
Start early, stay consistent, and let your investments grow over time.
You've got this!
🔑 Key Keywords:
self-employed retirement, SEP IRA, Solo 401(k), best retirement plan, Roth IRA
