5 Self-Employed Retirement Plans in The US: How to Plant Seeds for a Better Future

If you’re a freelancer, a solopreneur, or just a full-time employee working as a self-employed individual, you have some freedom — but also less stability. This status not only robs you of PTO or a fixed salary but also the ready-made retirement plan. And, once you stop working, even the best budgeting practices won’t save you. So, figuring something out for the future is your unavoidable responsibility.

Good news, though, there are valid options even for freelancers and business owners. Let’s learn how to save for retirement when you’re self-employed.

How retirement works in the United States

Typically, a retirement plan is a fund your common-law employers contribute to. Explained simply, some part of your salary goes to your retirement fund before you get a paycheck. Then, once you retire, you get this fund back via fixed annual payments. The size of these payments (and the fund in general) is calculated depending on how much you earned when you were working. It can decrease if you spend a lot of time unemployed, working part-time, or as a self-employed person. 

This model is called a defined benefit. In the US, though, such plans become less popular among employers — the maintenance is too pricey.

The alternative is defined-contribution plans. In this case, filling up the retirement fund is not just the employer’s responsibility — it’s yours too. In the US, there’s a number of such plans. These plans also offer potential passive income because you keep the money in stocks and other assets.

For self-employed people, freelancers or not, retirement plans can be a bit tricky. However, there are some options worth checking out. We did our best to figure out the complex stuff for you — here are the 5 retirement plans available for non-common-law employees, freelancers, solopreneurs, small business owners, and the like.

Option #1. Traditional IRA

How it works: IRA stands for the Individual Retirement Account. You put money into this investment account and keep it in stocks, bonds, and other assets. There are yearly contribution limits set up anew each year — in 2025, you can’t put more than $7000. There’s also a catch-up contribution for people over 50 years old, which raises the yearly limit this year up to $8000. There’s no minimal contribution, though — it can be as small as zero.

Best for: Beginner self-employed people who have just quit their job, beginner self-employed people aspiring to increase their income

Brownie points:

• Your traditional IRA contributions are eligible to tax deductions
• You can move your past employers’ 401(k) contributions to your traditional IRA — great for beginner freelancers quitting their full-time jobs!
• No income cap — great for ambitious self-employed folks!
• If you start working at a place with a retirement plan, you can still contribute
• If both you and your spouse have this type of account, the unemployed/low-income spouse still can contribute to their IRA as long as the other spouse is working

Drawbacks:

• Withdrawals are taxable — yep, once you retire and start withdrawing money from your traditional IRA, some of it will be cut (as if the self-employed tax wasn’t enough)
• Early withdrawals before retiring, aside from the tax, will also come with a 10% penalty

Option #2. Roth IRA

How it works: Like the traditional IRA, it’s also an individual investment account with the same maximum contribution limit of $7000/year and a catch-up contribution for people increasing the limit up to $8000/year. Unlike the latter, it doesn’t come with tax deductions — you can’t write off your Roth IRA contributions. However, it comes with cool perks — we described these below.

Best for: self-employed folks, freelancers, and small business owners who don’t earn a lot of money and probably don’t plan to

‍Brownie points:

• The rollover process from Roth 401(k) to Roth IRA is much easier
• The withdrawals are tax-free
• No penalty for early withdrawals
• If you start working at a place with a retirement plan, you can still contribute
• If both you and your spouse have this type of account, the unemployed/low-income spouse still can contribute to their IRA as long as the other spouse is working

Drawbacks:

• No immediate tax benefit
• If you’re not good at budgeting, penalty-free withdrawals may be too seductive so you might end up eating through your retirement plan
• The income you get from investment growth is taxed — it can also get penalized if withdrawn early, unless you fulfill certain requirements
• There is an income limit — if you earn more than that, you won’t be able to contribute or you’ll get the contribution limit reduced, see below

Option #3. Solo 401(k)

How it works: The traditional 401(k) is meant to be contributed by an employee and their employer. The solo 401(k) works in a similar fashion, except you’re both an employer and an employee. This means much larger contribution limits — up to $70000 a year, the “employer” and “employee” parts combined. If you’re 50–59 years old or 64 and older, your total limit is $77500, and if you’re 60–63 years old, your total limit is $81250 (all 2025 numbers). However, you’re not eligible if you have employees.

‍Best for: solopreneurs and self-employed people with a large income

Brownie points:

• You still can do a rollover of your past employer’s 401(k)
• Large contribution limits
• Allows you to avoid Unrelated Business Income Tax you might get for rental proceeds — as long as the loan is non-recourse and you’re not using your estate for a business
• If you have one employee and it’s your spouse, you can include them in a plan

Drawbacks:

• Penalties for early withdrawal
• You might have to file Form 5500-SF if your account has over $250000 in assets by the year’s end

Option #4. SEP IRA

How it works: SEP stands for Simplified Employee Pension, and it’s a retirement plan similar to IRA for freelancers and small business owners that, unlike previous options, considers your employees. The contribution limit in 2025 is $70000. Your contributions and the contributions you make for your employees are deductible. If you have employees who:

• have worked for you for 3 out of the last 5 years;
• reached the age of 21;
• received at least $750 in 2022, $650 in 2021, or $600 between 2016 and 2020 from your business;

you must include them in the retirement plan.

Best for: business owners with a few employees, particularly those with a rocky financial situation

Brownie points:

• Tax deduction for all contributions, including those you make for employees
• Easier maintenance compared to Solo 401(k) — no extra paperwork
• Annual contributions are not mandatory — good for the businesses that haven’t fully got on their feet yet

Drawbacks:

• No catch-up contributions for older account owners
• Can be incredibly expensive if you have a lot of eligible employees
• Early withdrawals are taxed as income and come with a 10% penalty

Option #5. SIMPLE IRA

How it works: The “simple” abbreviation stands for Savings Incentive Match PLan for Employees, which implies that this freelance retirement plan is not available to solopreneurs and freelancers. However, it can be a decent solution for business owners that meet certain requirements:

• Not more than 100 employees who earned at least $5000 last year
• No other retirement plans opened (you can’t own a 401(k) and a SIMPLE IRA at the same time)
• You have to offer the SIMPLE IRA plan to the employees who earned at least $5000 at the job you’re giving them last year — and you have to contribute to their SIMPLE IRAs regularly

Seems harsh! However, unlike SEP IRA, employees can take their part too, so it can be a bit easier for the owner. When it comes to your own contribution, you’re both the employer and the employee in this regard. The contribution limits are $16,500/year. The catch-up contributions are $3500 for people aged 50–59 and over 64, and there’s a higher catch-up contribution limit for people aged 60–63 — it’s $5250, according to SECURE 2.0.

Best for: Midsize and large businesses that have up to 100 employees

Brownie points:

• Tax deduction for all contributions
• Employees can contribute too

Drawbacks:

• Not the most beginner-friendly option
• Smaller contribution limits
• Retirement withdrawals are taxed

Wrapping up

Being a freelancer is already exhausting — don’t make your life harder and plan for the future now. The retirement system in America is a tricky one, but it still has viable options for people like you. There are different retirement accounts both for regular self-employed people and business owners with or without employees. Just pick one plan that works for you and start putting in whatever you can—even small amounts will grow over time.