Retirement accounts for self-employed people

One of the overlooked advantages of self-employment is access to retirement accounts with higher contribution limits than employer 401(k)s. Used correctly, they let you shelter a huge chunk of income from current taxes. There are three main options.

SEP IRA

Simplified Employee Pension IRA. Contribution limit: up to 25% of net self-employment earnings, capped at $70,000 in 2026. Easiest to set up — most brokerages offer one in under 10 minutes. Traditional (pre-tax) contributions only; no Roth option. Good if you have no employees and want zero administrative overhead.

Solo 401(k)

A 401(k) designed for self-employed individuals with no employees (or only a spouse). Contribution limit: up to $23,500 as 'employee' contributions plus up to 25% of earnings as 'employer' contributions, with a combined cap of $70,000. Can often contribute more than a SEP at the same income level because of the employee-plus-employer structure. Allows Roth contributions (in most plans). Allows loans in some plans. More paperwork than a SEP — a Form 5500 filing once assets exceed $250k.

SIMPLE IRA

Savings Incentive Match Plan for Employees. Contribution limit: $16,500 in 2026 plus employer match. Mainly useful for small businesses with employees where a 401(k) is too complex. For a solo operator, a SEP or Solo 401(k) is almost always better.

The advanced move

If you have both self-employment income AND W-2 income (full-time job with a 401(k) plus a side business), you can contribute to both a regular 401(k) from your employer AND a Solo 401(k) from your business — up to the combined limit. This is one of the most powerful strategies available to hybrid earners.