Best Self-Employed Retirement Plans for 2025

There’s a lot of freedom when you’re self-employed, but that comes with a lot of responsibility — including starting a self-employed retirement plan for yourself.

Surprisingly, there are multiple retirement plan options for self-employed people, starting with simple Roth and traditional IRAs, all the way to Solo 401(k)s that have a much higher contribution limit.

What Is the Best Retirement Plan if You Are Self-Employed?

1. Solo 401(k)

Best for: Self-employed people with no employees (except a spouse) who want to choose their tax advantage.

How does a Solo 401(k) work?

You can only open a Solo 401(k) if you have no employees. The exception is if your spouse draws income from your business, then you can cover them under your Solo 401(k), effectively doubling your contributions.

You can remember the difference in a Solo 401(k) and other self-employment retirement plans because solo = individual. You’ll even hear these plans called individual 40(k)s or one-participant 401(k).

Besides being a great option because you can cover your spouse, you can choose your tax advantage. Either make contributions with pre-tax dollars and then take tax-free distributions in retirement, or use after-tax money to contribute, then take tax-free distributions in retirement.

Contribution Limits

The total solo 401(k) contribution limit for 2025 is $61,000 in 2022 and $66,000 in 2025. The catch-up contribution for those 50 and up is $6,500 for 2022, and it’s $7,500 for 2025.

But there are contribution limits within that annual limit, and to understand them, you have to think of yourself as playing two roles: employee and employer.

• Employee: As the employee, you can contribute the lesser of 100% of your compensation or up to $20,500 in 2022 and $22,500 in 2025. If you’re 50 or older, you can contribute an additional $6,500 as an employee in 2022 and $7,500 in 2025.
• Employer: In the employer role, you can contribute an additional profit-sharing contribution of up to 25% of what you’re compensated for (this is your net self-employment income). The limit on compensation that can be used to factor your contribution is $305,000 in 2022 and $330,000 in 2025.

If you’re participating in another 401(k) — say you’re also employed through another company — the employee contribution limit applies across all plans. So employee contributions to your Solo 401(k) and company 401(k) cannot exceed the annual limit for that year.

Tax Advantage

One of the perks of a Solo 401(k) is that you can pick your tax advantage, either Roth or traditional. Roth contributions are made with pre-tax dollars and best for people who think they will earn more in retirement. Traditional contributions are made with after-tax dollars and better for those who are earning more now.

How to start a Solo 401(k)

You can open a Solo 401(k) at most online brokerages, like Vanguard, Fidelity, or Charles Schwab. You need your SS# or EIN, and your Solo 401(k) provider will have a plan adoption agreement for you to fill out.

There’s annual paperwork required with your Solo 401(k), And if your Solo 401(k) hits $250,000 or more in assets at the end of a given year, the IRS will require you to file a Form 5500-SF.

2. SEP IRA

Best for: Self-employed small business owners with no or very few employees.

How does a SEP IRA work?

SEP stands for Simplified Employee Pension. It’s an employer-sponsored retirement plan commonly used by small business owners and self-employed people who want to save for retirement. One of the major benefits for employers is they may make tax-deductible contributions on behalf of their employees.

The employer is the only one who makes contributions under this self-employed retirement plan, and they must contribute an equal percentage to all employees. So if you’re the business owner and contribute 10% of your income to your SEP IRA, you must contribute 10% of your employees’ incomes to their accounts. If you’re a solopreneur, you’d only contribute to your account.

For employees to qualify for your SEP IRA, they must be at least 21 years old, worked for your business for three of the last five years, and they need to have earned at least $650 in the past year.

Many small business owners like the SEP IRA because you’re not required to match employer contributions if your employees contribute.

This rule gives business owners more flexibility, especially as many businesses have better years than others.

Contribution Limits

Self-employed business owners can contribute as much as 25% of their net income in a SEP IRA, but it cannot exceed the maximum contribution limit for that year. In 2025, the max is $66,000, and in 2022 it was $61,000. The limit used to calculate contributions in 2025 is $330,000 in 2025 and $305,000 in 2022.

There are no catch-up contributions with a SEP IRA.

Tax Advantage 

Contributions made to a SEP IRA are tax-deferred, so distributions are taxed in retirement as income. That means these are set up for traditional contributions only, not Roth.

How to get started

SEP IRAs are pretty easy to set up, and many online brokerages offer SEP IRAs. You’ll need to draw up a plan agreement, which the brokerage should have, or you can use IRS Form 5305-SEP. You’ll need to inform all eligible employees about the SEP IRA, and then set up a separate SEP IRA for each of them.

3. SIMPLE IRA

Best for: Self-employed people running small to medium-sized businesses with 100 employees or less.

How does a SIMPLE IRA work?

A SIMPLE IRA stands for Savings Incentive Match Plan for Employees, and they’re available for employers with no more than 100 employees.

Employers are obligated to make contributions to their employees’ retirement plan, either elective or matching contributions. This can get pretty expensive if you have a lot of employees.

Overall contribution limits are much lower for a SIMPLE IRA, which isn’t as ideal for you as the business owner, especially if it’s your primary retirement savings plan.

Contribution limits

The annual SIMPLE IRA contribution limits in 2022 are $14,000for those under the age of 50 and $17,000 for those 50 and older.

For 2025, the SIMPLE IRA contribution limits for those under 50 are $15,500 and $19,000 for those 50 and up.Employers are generally obligated to make contributions to their employees’ SIMPLE IRA, and they can choose one of two ways:

• Non-elective contributions of 2% of the employee’s salary
• Dollar-for-dollar matching contributions up to 3% of their salary

The contribution limits applies to you, the business owner, because you’re also considered an employee.

Tax Advantage 

SIMPLE IRAs function as traditional IRAs, so contributions are deductible, and retirement disbursements are taxed as income. Contributions you make to your employees’ SIMPLE IRA are deductible as a business expense.

How to get started

You can open a SIMPLE IRA at many online brokerages, and the setup process is really pretty simple. Your employees own their retirement accounts and are responsible for managing them.

4. Traditional or Roth IRA

Best for: Side hustlers who are just starting their business.

How does a Traditional or Roth IRA work?

Traditional and Roth IRAs are available for almost anyone, which is why they’re a good option if you’re just starting out or self-employed. You can also roll over a 401(k) into an IRA if you’re leaving a job.

IRAs are incredibly easy to set up. They are much more widely available than the rest of the options on this list — even micro-investing apps like Acorns and Stash offer IRAs.

The way Roth and traditional IRAs are different is the tax treatment. If you think you’ll make more in retirement — for example, you’re just starting your business now — then choosing a Roth IRA may be a better option; because you pay taxes on contributions now and take tax-free retirement disbursements.

Traditional IRAs are better for those making more money now because contributions are tax-deductible now, and then you pay taxes on distributions retirement.

Contribution Limits

You can contribute up to $6,500 in 2025 and $6,000 in 2022. Those 50 years old and up can contribute an extra $7,500 in 2025 and $7,000 in 2022.

Tax Advantage 

As mentioned above, your tax advantage depends on which plan you choose. Traditional IRAs have tax-deductible contributions, but retirement disbursements are taxed. Roth IRAs have no immediate tax advantage, but retirement distributions are tax-free.

How to get started

Almost every online brokerage offers traditional and Roth IRAs, making them the easiest option to set up. You can self-direct your investments, or you can use a robo-advisor like Betterment to manage your portfolio so it’s optimized for retirement.

M$M tip: No matter which self-employed retirement plan you choose, I highly recommend using Personal Capital to keep track of your savings progress, track your net worth, and analyze your fees so you can keep more of your money. Personal Capital is free, and my wife and I have used it for years.

The Final Word on Best Self-Employed Retirement Plans

Retirement accounts for self-employed people aren’t nearly as confusing as you might think. Start thinking about the kind of business you run.

Are you a solopreneur? A Solo 401(k) is a really great option — I consider it one of the best. There’s a much higher contribution limit, and you can cover your spouse.

If you have employees and want to extend your retirement plan to them, a SEP IRA and SIMPLE IRA are two good choices. Just be aware that you’re obligated to make contributions to either.

The bottom line is that you have options, and there’s no better time than now to start your retirement savings plan.