Retirement Savings Options for the Self-Employed

Yes! You can still save for retirement when you are the boss. Here are your options:

IRA or Roth IRA

Number of Employees: Not applicable; these are individual plans.

Who contributes?: The individual.

Contribution limit: Up to $7,000 in 2025 + $1,000 catch-up contribution for those age 50 or over.

Pro: Simple to open and manage, cheap to maintain.

Con: Low contribution limit. Once your income grows, you will want to graduate to other options with higher contribution limits. Note - there are income limitations you need to be aware of that may disqualify you from both saving to a Roth IRA or being able to receive a tax deduction on your Traditional IRA contribution.

Simplified Employee Pension (SEP) IRA or Roth SEP IRA

Number of Employees: Any number

Who contributes?: The employer only.

Contribution limit: The lesser of $70K in 2025 or up to 25% of compensation or net self-employment earnings. The 2025 limit on compensation is $350K.

Pro: Simple and cheap.

Con: It may not be the best plan if you have high employee turnover. Employees are 100% vested in the SEP-IRA immediately, and you must contribute the same percentage to everyone eligible (including you).

Simple IRA

Number of Employees: Up to 100

Who contributes?: The employer and the employee.

Contribution limit: Employees can save up to $16,500 in 2025 (plus a $3,500 catch-up contribution for those age 50 or over). An employer can choose to either make a dollar-for-dollar match of up to 3% of the employee's pay or contribute 2% of compensation, whether the employee contributes or not. New with the Secure Act 2.0 - employees aged 60-63 have a higher catch-up contribution of $5,250.

Pro: Simple and cheap.

Con: Employees are 100% vested in the Simple IRA, so again, this may not be the best plan if you have high employee turnover. The contribution limit is also lower, so it is not the best option if you are making a high income.

Individual 401k or Individual Roth 401k

Number of Employees: Just the owner and their spouse.

Who contributes?: The owner and their spouse.

Contribution limit: Up to $70K in 2025 (plus a $7,500 catch-up contribution for those age 50 or over) or 100% of earned income, whichever is less. NEW - for those aged 60-63, the catch-up is $11,250 instead of $7,500 (Secure Act 2.0).

Pro: Cheap to set up and administer.

Con: You must file paperwork with the IRS each year once you have more than $250K in your account. 401k plan limits are per individual, not per plan, so if you maximize your savings to a 401k at work, you can not save to another solo 401k for a side gig earning money.

401k or Roth 401k

Number of Employees: Any number

Who contributes?: Employer and employees

Contribution limit: 100% of your compensation or $23,500 (plus that $7,500 catch-up contribution, if eligible), whichever is less. NEW - for those aged 60-63, the catch-up is $11,250 instead of $7,500 (Secure Act 2.0).

Pro: You can set up vesting schedules, as the employer, to encourage lower employee turnover, and employees can save more than they can in another plan.

Con: More administrative work and fees. Like above, 401k plan limits are per individual, not per plan, so if you maximize your savings to a 401k at work, you can not save to another 401k for a side gig earning money.

Originally published 1/2014

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.