Self-Employed Retirement Plans: SEP IRA, Solo 401(k), & More
Self-employed individuals and small business owners have unique retirement savings options that offer major tax advantages. Here’s how SEP IRAs, Solo 401(k)s, and SIMPLE IRAs can help lower your 1040 taxes while securing your future.
1. SEP IRA: The Simplest Tax-Advantaged Plan for the Self-Employed
✅ Contributions are tax-deductible, reducing your taxable income.
✅ Maximum contribution for 2024: Up to 25% of net earnings, max $69,000.
✅ No annual IRS filing requirements.
🔗 Related: How Retirement Contributions Can Reduce Your 1040 Taxes
2. Solo 401(k): Maximize Retirement Savings as a Business Owner
✅ Designed for self-employed individuals with no employees (except a spouse).
✅ Contribution limits (2024):
- Employee: Up to $23,000 ($30,500 if 50+).
- Employer (business) match: Up to 25% of net earnings.
- Total max contribution: $69,000 ($76,500 if 50+).
✅ Roth Solo 401(k) option available for tax-free withdrawals in retirement.
🔗 Related: Traditional vs. Roth IRA: Which One Lowers Your Taxes More?
3. SIMPLE IRA: A Retirement Plan for Small Businesses
✅ Best for small businesses with up to 100 employees.
✅ Lower contribution limits than SEP & Solo 401(k): Up to $16,000 ($19,500 if 50+).
✅ Requires mandatory employer contributions.
🔗 Related: How 2025 Contributions to IRA & 401(k) Can Reduce 2024 Taxes
4. Choosing the Best Self-Employed Retirement Plan
| Plan Type | Best For | Max Contribution (2024) |
|---|---|---|
| SEP IRA | Freelancers & business owners | $69,000 |
| Solo 401(k) | Self-employed with no employees | $69,000 ($76,500 if 50+) |
| SIMPLE IRA | Small businesses with employees | $16,000 ($19,500 if 50+) |
🔗 Related: The Health Savings Account (HSA): A Triple Tax Advantage
5. How to Set Up a Self-Employed Retirement Plan
✅ Choose a provider (Fidelity, Vanguard, Charles Schwab, etc.).
✅ Open an account online (for SEP IRA, Solo 401(k), or SIMPLE IRA).
✅ Make contributions before your tax deadline.
🔗 Related: The Saver’s Credit: How to Get a Tax Break for Retirement Contributions
Final Thoughts
Self-employed retirement plans provide huge tax benefits while helping you save for the future. Whether you choose a SEP IRA, Solo 401(k), or SIMPLE IRA, each option offers tax deductions and long-term financial growth.
🚀 Next Steps:
- Compare SEP IRA vs. Solo 401(k) based on your income and tax needs.
- Open a self-employed retirement plan before your tax filing deadline.
- Consider adding an HSA for extra tax savings.
🔗 Need more tax-saving strategies? Visit our Retirement Tax Savings Guide.