Self-employed retirement plans to consider

When you work for yourself, you also handle the retirement plan your employer used to run, both for yourself and for any staff you have. The choice comes down to two questions: how much do you want to contribute, and do you have employees? An IRA is the place to start, a solo 401(k) or SEP IRA gets you high limits without staff, a SIMPLE IRA fits once you have a team, and a defined benefit plan lets a high earner shelter the most.

Here is how the five main options compare. If you have a growing team, our guide to small business retirement plans covers that stage in more depth.

Traditional or Roth IRA

2026 contribution limit: $7,500, or $8,600 if you are 50 or older. See the 2026 IRA contribution limits guide for the full breakdown.

Best for: anyone just starting a retirement plan, or someone leaving a job to freelance who wants to roll an old 401(k) somewhere.

Tax treatment: a traditional IRA contribution may be deductible; a Roth IRA gives no deduction but tax-free withdrawals in retirement.

An IRA is the simplest option and often the best first one. A traditional IRA defers tax until retirement; a Roth IRA is funded with after-tax money for tax-free withdrawals later. You can open either at an online broker such as Fidelity, E*TRADE, or J.P. Morgan in about half an hour.

If you have employees: no obligations. An IRA is yours alone.

Solo 401(k)

2026 contribution limit: total additions are capped at $72,000 (or 100% of earned income, if lower), with a catch-up on top of $8,000 at 50 or older, or $11,250 for ages 60 to 63, for a personal maximum of $80,000 or $83,250.

Best for: self-employed people with no employees other than a spouse.

Tax treatment: pre-tax contributions with taxable withdrawals, or a solo Roth 401(k) for after-tax contributions and tax-free withdrawals.

The IRS calls this a "one-participant 401(k)." Because you act as both employer and employee, the limits are high and flexible year to year. For 2026, the breakdown is:

• As the employee: defer up to $24,500 (or 100% of compensation, if lower).
• As the employer: add up to 25% of compensation. For a sole proprietor or single-member LLC, that works out to roughly 20% of net self-employment income, because the calculation is based on net profit minus half your self-employment tax and minus the contribution itself.
• Compensation ceiling: $360,000 for 2026.
• Total employee-plus-employer additions cannot exceed $72,000, with the age-50 catch-up on top of that.

Setup note: many online brokers offer solo 401(k)s. Once the account balance exceeds $250,000, you must file Form 5500-EZ with the IRS each year.

If you have employees: you cannot use a solo 401(k) once you have non-spouse employees. You can put a spouse on payroll and let them contribute up to the same limits.

SEP IRA

2026 contribution limit: the lesser of $72,000 or 25% of compensation (about 20% of net self-employment income for a sole proprietor), with a $360,000 compensation ceiling. No catch-up contributions.

Best for: self-employed people and small businesses that want high limits and minimal paperwork. It stays simple with no employees; the cost rises as you add staff.

Tax treatment: contributions are deductible. A Roth SEP IRA is now allowed under SECURE 2.0 if you prefer after-tax contributions.

A Simplified Employee Pension needs almost no paperwork and no annual IRS filing. Like a solo 401(k), it has high limits and does not require a contribution every year. The main difference is the math: a SEP is funded entirely by employer contributions, with no separate employee deferral.

If you have employees: you must contribute the same percentage of pay for every eligible employee as you do for yourself. Contribute 10% for yourself and you must contribute 10% for each employee. That equal-percentage rule is what makes a SEP expensive once you have more than a couple of workers, and it is usually why a business with staff moves to a SIMPLE IRA or a 401(k) instead.

SIMPLE IRA

2026 contribution limit: $17,000, plus a $4,000 catch-up at 50 or older ($5,250 for ages 60 to 63). Businesses with 25 or fewer employees can use a higher $18,100 limit.

Best for: a business with employees but fewer than 100 of them.

Tax treatment: contributions are deductible; distributions are taxed. Employer contributions to employee accounts are a business expense. Roth contributions are allowed under SECURE 2.0.

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is quick to set up and gives employees immediate ownership of their accounts. Limits are lower than a SEP or solo 401(k), but you are not required to make the same large equal-percentage contribution a SEP demands.

There is also a SIMPLE 401(k), which works almost identically but permits loans, at the cost of more paperwork and administration.

If you have employees: you must either match employee contributions up to 3% of pay, or make a 2% fixed contribution for every eligible employee whether or not they contribute.

Defined benefit plan

2026 contribution limit: set by an actuary, based on the income target at retirement, your age, and expected returns. Often tens of thousands, sometimes well into six figures.

Best for: a high-income self-employed person with no employees who wants to shelter the largest possible amount.

Tax treatment: contributions are deductible; distributions are taxed as income. An actuary must calculate the limit each year, which adds cost and complexity.

A defined benefit plan is a self-funded pension that guarantees a set retirement income. Setup and annual fees are high and rise with employees, and you must commit to funding it every year. In return, the deductible contribution can be far larger than any other plan allows.

These plans often appeal to freelancers who earn too much to fully use the qualified business income (QBI) deduction. QBI, made permanent by the One Big Beautiful Bill Act in 2025, lets many business owners deduct 20% of business income, but it phases out for 2026 above $403,500 of taxable income for joint filers ($201,750 for individuals), disappearing at $553,500 ($276,750 individual).

Setup note: not every broker offers these; Charles Schwab is one that does.

If you have employees: you can extend the plan to them, with contributions calculated the same way.

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Setting up a self-employed plan

Most of these plans can be opened in under a day at a brokerage like Fidelity or Charles Schwab. Depending on the plan, you will gather some financial documents and pay a setup or annual fee. A financial advisor can handle the setup if you would rather not.

Frequently asked questions

What is a Keogh plan?

A Keogh plan (also called an HR-10 plan) is an older, complex retirement plan for self-employed people and business owners, usually high earners. It can be structured as a defined contribution or a defined benefit plan and allows large contributions, but it carries heavy paperwork and federal filing requirements, so it is best set up with an advisor or accountant. Most people today use a solo 401(k), SEP IRA, or defined benefit plan instead.

Which self-employed retirement plan is best?

It depends on your situation. With no employees, a traditional or Roth IRA is the simplest start, and a solo 401(k) or SEP IRA gives you far higher limits. With employees, a SIMPLE IRA or a 401(k) spreads the cost more predictably than a SEP's equal-percentage rule. Factor in how much you want to contribute for yourself and for staff, and the tax effect of each.

How many retirement plans can a self-employed person contribute to?

You can have more than one, but your total contributions cannot exceed the overall limit, $72,000 for 2026, across plans that share it (a solo 401(k) and a SEP IRA, for instance). An IRA has its own separate limit. The IRS raises these figures most years, so check each year.

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