Being your own boss brings freedom and challenges, especially when planning for retirement. Without an employer-sponsored plan, you alone must ensure your financial future. This guide offers clear steps, detailed options, and essential tips to help you start saving today.

Why Saving for Retirement Matters

Relying solely on Social Security can leave you short of the lifestyle you envision after leaving the workforce. For those who run their own business or work freelance, creating a personal retirement strategy is crucial from day one.

By contributing to tax-advantaged retirement accounts, you can also lower taxable income for the year while setting the stage to maximize long-term growth through compounding. Each dollar you set aside now has the potential to grow substantially over decades.

Self-Employed Retirement Plan Options

SEP IRA (Simplified Employee Pension IRA)

Ideal for solo entrepreneurs or those with only a few employees, the SEP IRA is easy to establish and flexible.

For 2025, you may contribute up to the lesser of 25% of net self-employment earnings or $70,000. In practice, the calculation usually works out to around 20% of net income after accounting for self-employment taxes.

Key features of a SEP IRA include:

• Tax-deductible contributions made by you as the employer
• Ability to open and fund the plan until the tax-filing deadline, including extensions
• Requirement to contribute the same percentage of income for any eligible employees

Solo 401(k) or Individual 401(k)

For business owners with no employees other than a spouse, the Solo 401(k) offers some of the highest contribution limits available to individuals.

In 2025, participant deferrals can reach $23,500, with an additional $7,500 catch-up if you are 50 or older. Employer contributions on top of this can push your total up to $70,000.

You can choose between Roth or pre-tax options for deferrals, giving you flexibility in how you manage your tax liability now versus in retirement. Employer contributions are also deductible as business expenses, lowering your taxable profit.

SIMPLE IRA (Savings Incentive Match Plan for Employees)

Small businesses with up to 100 employees, including sole proprietors, can establish a SIMPLE IRA by October 1 of the current year.

Employee salary deferrals in 2025 are capped at $17,600, with an extra $3,850 catch-up if you are 50 or older. Employers must either match contributions up to 3% of salary or make a 2% non-elective contribution.

This plan is especially helpful if you expect to take on employees in the future, as it’s straightforward to administer and fully vested immediately.

Traditional and Roth IRA

Regardless of other plans, anyone with earned income can open a Traditional or Roth IRA.

In 2025, the combined contribution limit is $7,000, with a $1,000 catch-up for those 50 and over. While the Roth IRA does not offer an upfront deduction, it allows for tax-free withdrawals in retirement.

These IRAs can serve as supplemental savings vehicles alongside SEP IRAs or Solo 401(k)s.

Tax Benefits

Choosing the right retirement plan can significantly impact your tax situation. Here are some of the most powerful benefits:

• Deduct contributions on your personal or business tax return
• Employer contributions reduce net business income
• Roth options allow for tax-free growth and distribution
• Potentially lower quarterly estimated tax payments

How to Set Up Your Plan

Establishing your retirement account can be straightforward if you follow these steps:

• Select a reputable financial institution or online broker
• Complete the necessary IRS forms or use your provider’s templates
• Fund your account by the appropriate deadline (tax day, year end, or Oct 1)
• Track contributions to ensure you stay within IRS limits

Other Key Considerations

Beyond the basics, consider these factors as you build your retirement strategy:

• Combine multiple accounts for diversification and flexibility
• Review plan fees and investment options annually
• Adjust contributions as your income changes each year
• Consult a tax professional for personalized advice

Next Steps for a Secure Future

Saving for retirement when you’re self-employed may feel daunting, but the right plan can be a game-changer. Start by evaluating your income and goals, then choose the account that aligns with your needs.

By setting up and funding a SEP IRA, Solo 401(k), or another suitable plan, you take control of your financial destiny. The discipline you build today will reward you with peace of mind and financial stability for decades to come.

Embrace the opportunity to build a secure tomorrow by taking action now. Your future self will thank you for the diligence and planning you start today.