5 Retirement Plans Self-Employed Individuals Should Consider

If you are self-employed or own a small business, retirement planning is your responsibility.

Unlike employees who may have access to an employer-sponsored 401(k), self-employed individuals usually need to create their own retirement savings plan.

The good news is that several tax-advantaged retirement plans are available.

These plans can help you save for retirement and may also reduce taxable income during high-income years.

Here are five common retirement plan options for self-employed individuals and small-business owners.

1. Traditional IRA or Roth IRA

An IRA is often the easiest place to start.

It works well for someone who is just starting a business or does not yet have much income from self-employment.

You can choose between a Traditional IRA and a Roth IRA.

With a Traditional IRA, contributions may be deductible. Later withdrawals are generally taxed as income.

With a Roth IRA, contributions are not deductible. However, qualified withdrawals in retirement can be tax-free.

For 2026, the IRA contribution limit is $7,500. If you are age 50 or older, the limit is $8,600.

An IRA is simple to open. There is no annual IRS filing requirement for the account owner.

However, income limits may affect Roth IRA eligibility or Traditional IRA deductibility.

2. Solo 401(k)

A Solo 401(k) is designed for a business owner with no employees, other than a spouse.

This plan can allow larger contributions than a regular IRA.

For 2026, the total Solo 401(k) contribution limit is $72,000, or 100% of earned income, whichever is less.

If you are age 50 or older, you may also be able to make catch-up contributions.

A Solo 401(k) has two parts.

First, you contribute as the employee.

Second, your business contributes as the employer.

For sole proprietors and single-member LLC owners, the employer contribution is based on net self-employment income after certain adjustments.

A Solo 401(k) can be a strong option for a self-employed person who wants to save a large amount for retirement.

However, once the plan balance exceeds certain limits, annual IRS filing may be required.

3. SEP IRA

A SEP IRA is another popular retirement plan for self-employed individuals and small-business owners.

It is easier to administer than a Solo 401(k).

For 2026, the SEP IRA contribution limit is the lesser of $72,000 or up to 25% of compensation or net self-employment earnings.

There is no catch-up contribution for a SEP IRA.

A SEP IRA is flexible because you do not have to contribute every year.

However, if your business has eligible employees, you must generally contribute the same percentage of compensation for them as you contribute for yourself.

This can become expensive if you have several employees.

For a self-employed person with no employees or only a few employees, a SEP IRA may be a practical option.

4. SIMPLE IRA

A SIMPLE IRA is often used by small businesses with employees.

It is available to businesses with 100 or fewer employees.

For 2026, the regular employee contribution limit is $17,000. Some plans may allow a higher limit under SECURE 2.0 rules.

Catch-up contributions may also be available for older employees.

Unlike a SEP IRA, employees can contribute to their own SIMPLE IRA through salary deferrals.

The employer is generally required to make either matching contributions or nonelective contributions.

A SIMPLE IRA is easier to operate than a regular 401(k), but it has lower contribution limits than a Solo 401(k) or SEP IRA.

It may be a good fit for a small business that wants to offer a retirement benefit without the complexity of a full 401(k) plan.

5. Defined Benefit Plan

A defined benefit plan is a type of pension plan.

It is usually best for high-income self-employed individuals who are closer to retirement and want to contribute a large amount each year.

The contribution limit is not a simple fixed dollar amount.

It is calculated based on factors such as age, expected retirement benefit, income, and investment assumptions.

This type of plan usually requires an actuary.

It also has higher setup costs, annual fees, and administrative requirements.

A defined benefit plan may allow much larger tax-deductible contributions than other retirement plans.

However, it also requires a long-term funding commitment.

It is generally not the best option for someone with unstable income or limited cash flow.

Which Plan Should You Choose?

There is no single best retirement plan for every self-employed person.

The right plan depends on several factors.

Your income level matters.

Whether you have employees matters.

Your age matters.

Your cash flow matters.

Your tax situation also matters.

For someone just starting out, a Traditional IRA or Roth IRA may be enough.

For a self-employed person with no employees and strong income, a Solo 401(k) may be attractive.

For a business owner who wants simple administration, a SEP IRA may be a good choice.

For a small business with employees, a SIMPLE IRA may be worth considering.

For a high-income professional close to retirement, a defined benefit plan may provide the largest tax deduction.

Before choosing a plan, it is a good idea to speak with a CPA or financial advisor.

Retirement planning is not only about saving money.

It is also about choosing the right tax strategy for your business and your future.