The Ultimate Guide to Retirement Plans for Self-Employed Entrepreneurs

The Ultimate Guide to Retirement Plans for Self-Employed Entrepreneurs

Retirement planning for self-employed pros

A Practical Approach to Building Wealth and Security Without a 9-to-5 Job

Being your own boss comes with a lot of perks—freedom, flexibility, and total control over your career. But there’s a significant drawback that many self-employed entrepreneurs tend to overlook: there’s no employer-sponsored retirement plan waiting for you. You won’t find a 401(k) match, pension contributions, or an HR department nudging you to invest in your future.

However, the need to save for retirement becomes even more crucial when you’re working for yourself. As a self-employed business owner, freelancer, consultant, or gig worker in the U.S., the responsibility for your financial future rests entirely on your shoulders—this includes how you build long-term wealth and when you can finally afford to retire.

The silver lining? You have some fantastic options. In fact, self-employed individuals often have access to some of the most flexible and tax-advantaged retirement accounts available today.

In this Article, we’ll dive into the best retirement plans for self-employed entrepreneurs—what they are, how they function, and how to select the one that aligns with your goals. If you’re ready to stop delaying your retirement planning and start paving the way for a secure financial future, this guide is just what you need.

Why Retirement Planning Matters Even More for the Self-Employed

Let’s be honest—when you’re busy running a business, retirement planning often takes a back seat. You’re juggling cash flow, marketing, operations, and making sure your clients are happy. Retirement? That can wait, right?

But here’s the reality: the earlier you start planning, the easier it gets. Time is your best friend when it comes to compound growth. Even if you’re only able to make small contributions consistently, those can add up to hundreds of thousands of dollars over a few decades.

Since there’s no employer putting money into your retirement fund for you, it’s all on you to take the reins. The good news is that self-employed individuals can often contribute more to their retirement accounts compared to traditional employees. This means more tax savings, greater control, and the chance to grow your wealth on your own terms.

Now, let’s dive into the different retirement plans available and see how they stack up.

1. SEP IRA – The Simple and Powerful Option

Easy retirement plan for self-employed individuals

A SEP IRA (Simplified Employee Pension) is one of the go-to retirement plans for small business owners, freelancers, and solo entrepreneurs. It’s straightforward to set up, involves minimal paperwork, and lets you contribute a lot more than a traditional IRA.

You can put away up to 25% of your net earnings, with a cap of $69,000 in 2024 (and that number adjusts each year with inflation). That’s a significant perk for those who earn a higher income.

SEP IRAs are perfect for solopreneurs or business owners without employees, but they can also work well if you have a small team. Just keep in mind that if you do have employees, you’ll need to contribute the same percentage of their compensation as you do for yourself.

The SEP IRA is a great option because it allows you to make tax-deductible contributions, and your investments can grow tax-deferred until you decide to withdraw funds during retirement. It’s a solid choice if you’re after a straightforward retirement account with generous contribution limits. 

2. Solo 401(k) – A Powerful Plan for Solo Entrepreneurs

If you’re running a one-person business (or a business where only you and your spouse are earning income), the Solo 401(k)—also known as an individual 401(k)—might just be the perfect fit for you.

With the Solo 401(k), you can contribute as both the employer and the employee, which can significantly boost your contribution limit. For 2024, you can put in:

Up to $23,000 as the “employee” (or $30,500 if you’re 50 or older), plus

Up to 25% of your business earnings as the “employer,” with a total cap of $69,000 (or $76,500 if you’re catching up)

That’s one of the highest contribution limits available for self-employed individuals. Plus, unlike a SEP IRA, you have the option to make Roth contributions to a Solo 401(k), meaning you pay taxes now and enjoy tax-free withdrawals down the line.

Another perk? You can take loans from your Solo 401(k)—something that’s not typically allowed with most other retirement plans. If you’re disciplined and looking for maximum flexibility, this is a fantastic tool for entrepreneurs without employees.

3. SIMPLE IRA – A Balanced Option for Growing Businesses

The SIMPLE IRA (Savings Incentive Match Plan for Employees) is a solid choice for entrepreneurs with a small team who want a retirement plan that’s simpler to manage than a full 401(k).

In 2024, you can contribute up to $16,000, with an extra $3,500 if you’re 50 or older. Employers are required to match employee contributions up to 3% of their salary or make a fixed contribution of 2%, regardless of whether employees participate.

SIMPLE IRAs might have lower contribution limits compared to a Solo 401(k) or SEP IRA, but they’re a breeze to set up and manage compared to traditional 401(k)s. They’re a great option if you’re looking to provide a retirement benefit for your team without the hassle or expense of more complex plans.

4. Roth IRA – Tax-Free Growth for Long-Term Advantage

Even if you’re using a SEP or Solo 401(k), it’s a smart move to consider opening a Roth IRA to enhance your retirement strategy.

With a Roth IRA, you put in money that’s already been taxed, but the beauty is that your investments grow tax-free, and you can take out your money without paying taxes during retirement (as long as you meet certain conditions). This can be a game-changer for building long-term wealth.

In 2024, you can contribute up to $7,000 (or $8,000 if you’re 50 or older), but keep in mind that eligibility starts to phase out at higher income levels. Still, Roth IRAs provide great investment flexibility and are perfect if you think you’ll be in a higher tax bracket when you retire. 

A popular strategy is to mix a tax-deductible account (like a SEP or Solo 401(k)) with a Roth IRA, allowing you to enjoy tax savings now while securing tax-free income later.

5. Traditional IRA – A Flexible Supplement

If your income is too high for Roth contributions or you’re looking for another way to save for retirement, a Traditional IRA could be a great fit. Depending on your income and whether you or your spouse have a retirement plan at work, your contributions might be tax-deductible.

For 2024, the contribution limits are the same as for Roth IRAs—$7,000, or $8,000 if you’re over 50. These accounts allow for tax-deferred growth, meaning you won’t owe taxes until you withdraw the money in retirement.

Traditional IRAs can be a valuable addition to your main retirement plan or serve as a solid starting point if you’re just beginning to save and want an easy, low-cost option.

6. Defined Benefit Plan – The Retirement Supercharger

If you’re pulling in a high income and looking to stash away some serious cash for retirement, a Defined Benefit Plan—kind of like a traditional pension—can be a game changer.

These plans let you contribute hundreds of thousands of dollars each year, depending on factors like your income, age, and how much you want to receive in retirement. Plus, contributions are tax-deductible, and the money grows tax-deferred.

However, keep in mind that defined benefit plans come with some complexities, like actuarial calculations and annual filings, which means they’re best suited for entrepreneurs who have a steady high income and want to maximize their tax savings while building wealth quickly.

This isn’t really a beginner’s option, but if you’re in your 40s or 50s and making six figures or more, it could be a fantastic way to catch up and retire with peace of mind.

How to Choose the Right Retirement Plan for You

Find the best-fit retirement plan for your needs

With so many solid options out there, picking the right plan really hinges on a few key factors:

• Your income level
• The structure of your business
• Whether you have employees or not
• Your age and when you plan to retire
• Your tax preferences (do you want to save now or later?)

If you’re a solo entrepreneur without any employees and you’re after high contribution limits, the Solo 401(k) is probably your best option. On the other hand, if you’re looking for something straightforward and don’t need the Roth features, the SEP IRA is a fantastic pick.

Got a small business with a handful of employees? A SIMPLE IRA might strike the right balance between ease and value. And if you’re eager to save aggressively while slashing your taxes, a Defined Benefit Plan could be your secret weapon.

And remember: you can mix and match plans. For instance, you can contribute to both a Solo 401(k) and a Roth IRA (as long as you meet the income limits) to diversify your tax exposure and really boost your retirement potential.

The Tax Benefits You Shouldn’t Ignore

One of the biggest perks of retirement planning is the immediate tax savings. Contributions to SEP IRAs, Solo 401(k)s, and other qualified plans. 

If you put $30,000 into a Solo 401(k), you could potentially slash your federal income taxes by thousands, depending on your tax bracket. That’s cash you’d normally hand over to the IRS—now it’s working for your future instead.

And when it comes to Roth accounts, while you won’t see a deduction right now, you’re creating a stash of tax-free money that you can tap into during retirement without stressing over future tax increases.

For self-employed folks in high-tax states or brackets, this isn’t just a perk—it’s a smart move.

Final Thoughts: Start Today, Thank Yourself Tomorrow

As self-employed entrepreneurs, it’s easy to get caught up in growing your business, chasing new opportunities, and serving clients. But if you overlook your future, you might find yourself working indefinitely—not because you want to, but because you have to.

Planning for retirement is a form of self-care and a savvy strategy. The best part? You don’t need to be wealthy to begin. The secret is consistency. Pick the right plan, contribute regularly, and watch your future wealth blossom—tax-advantaged, secure, and entirely yours.

No boss, no HR department, no pension fund. Just your vision, your discipline, and your financial freedom.

So, why not take that first step today? Open that SEP IRA. Kick off that Solo 401(k). If you need guidance, meet with a financial advisor, but don’t put it off.

Because the sooner you start planning for retirement, the sooner you can choose to work because you want to—not because you have to.

Need assistance in selecting the perfect retirement plan for your business? Let’s create a tailored strategy that aligns with your goals, income, and vision for the future. Your future self will be grateful!