Best retirement plan for self-employed workers in 2026

Last updated October 2026

Working for yourself comes with plenty of freedom, but it also means no employer is setting up a 401(k) match or automatically enrolling you in a pension. If you want to retire comfortably, you need to build that infrastructure on your own. The good news is that self-employed individuals have access to some of the most powerful retirement savings vehicles available to anyone, and several of them offer contribution limits that far exceed what a typical W-2 employee can put away.

The challenge is that there are multiple plan types to choose from, each with different contribution limits, tax treatment, setup complexity, and suitability depending on your income level and whether you have employees. A freelance graphic designer earning $60,000 a year has very different needs than a self-employed consultant pulling in $400,000. The plan that works best for one may be a poor fit for the other.

This guide breaks down every major retirement plan option available to self-employed workers in 2026. We cover how each one works, who it suits best, what the contribution limits are, and which providers stand out. Whether you are a freelancer, independent contractor, sole proprietor, or small business owner with no employees, one of these plans belongs in your financial toolkit.

Before diving in, a quick note on terminology. "Self-employed" here covers anyone who earns income from their own business, whether that is freelance work, consulting, a sole proprietorship, an LLC, or an S-corp where you are the only employee. Some plans work well even if you have a handful of employees, and we will note that where relevant.

Solo 401(k): the most powerful option for solopreneurs

The solo 401(k), sometimes called an individual 401(k) or one-participant 401(k), is the gold standard retirement plan for self-employed individuals without employees. It mirrors the structure of a traditional employer 401(k) but is designed for business owners who work alone or with only a spouse.

Why the solo 401(k) stands out

The solo 401(k) offers the highest contribution limits of any self-employed retirement plan. In 2024, the total contribution limit was $69,000 (or $76,500 if you were 50 or older and eligible for catch-up contributions). The IRS adjusts these numbers periodically for inflation, so 2025 and 2026 limits are expected to be in a similar range. What makes the solo 401(k) unique is that you contribute in two capacities: as both the employee and the employer. On the employee side, you can defer up to $23,000 of your compensation (the 2024 limit). On the employer side, you can contribute up to 25% of your net self-employment income. Together, these two contribution streams allow you to shelter substantially more income than most other plans.

Roth option. Many solo 401(k) providers now offer a Roth contribution option, which lets you make after-tax employee deferrals that grow tax-free. This is a meaningful advantage over plans like the SEP IRA, which only allows pre-tax contributions. If you expect your income to be higher in retirement, or if you want tax diversification, the Roth solo 401(k) is worth considering.

Loan provision. Unlike IRAs, solo 401(k) plans can include a loan feature. You can borrow up to $50,000 or 50% of your vested balance (whichever is less) and pay yourself back with interest. This gives you a financial safety net without triggering taxes or penalties, though not all providers offer this feature.

Flexibility in contributions. Because you wear both hats (employee and employer), you have more control over how much you contribute each year. In a lean year, you can skip contributions entirely. In a profitable year, you can max out both sides. This flexibility makes the solo 401(k) well-suited to the variable income that self-employment often brings.

Who the solo 401(k) is best for

The solo 401(k) is ideal for self-employed individuals with no full-time employees other than a spouse. If you have employees, you generally cannot use a solo 401(k) and would need to look at a SEP IRA, SIMPLE IRA, or a full employer 401(k) plan. The solo 401(k) is especially attractive for high earners who want to maximize their tax-deferred savings, since the combined employee and employer contribution limits are the highest available.

Providers to consider

Carry is a provider specifically built for solo 401(k) plans and deserves strong consideration. Carry focuses on the self-employed market and offers features like Roth contributions, a wide range of investment options, and a streamlined setup process designed for freelancers and solopreneurs. If you are looking for a provider that understands the needs of independent workers, Carry is worth exploring.

Fidelity offers a solo 401(k) with no account fees, no opening minimums, and access to a broad range of Fidelity funds and ETFs. Fidelity is a strong choice if you want a well-known brokerage with excellent customer support and a full suite of financial tools.

Schwab also offers a solo 401(k) with no account fees and commission-free online trading. Schwab's platform is straightforward and reliable, and the integration with Schwab's broader banking and brokerage services can simplify your financial life.

Things to watch for with a solo 401(k)

Once your plan assets exceed $250,000, you are required to file Form 5500-EZ with the IRS annually. This is a relatively simple form, but it is an administrative requirement that plans like the SEP IRA do not have. Additionally, setting up a solo 401(k) involves adopting a plan document, which is slightly more involved than opening a SEP IRA or traditional IRA. Most providers handle this for you, but it is worth understanding the process.

For a deeper look at solo 401(k) providers and how to choose between them, see our dedicated guide to the best solo 401(k) for freelancers.

SEP IRA: simplicity and high limits

The Simplified Employee Pension IRA, or SEP IRA, is one of the easiest retirement plans to set up and maintain. It is a popular choice for self-employed individuals and small business owners who want high contribution limits without the administrative complexity of a 401(k).

How the SEP IRA works

With a SEP IRA, contributions are made entirely by the employer (which is you, the self-employed individual). There is no employee deferral component. You can contribute up to 25% of your net self-employment income, with a maximum dollar cap that was $69,000 in 2024. The IRS adjusts this cap periodically. All contributions are pre-tax, meaning they reduce your taxable income in the year you make them.

Simple setup. Opening a SEP IRA is about as easy as opening a regular brokerage account. You fill out a short adoption agreement (IRS Form 5305-SEP or a provider-specific version), and you are done. There is no annual filing requirement with the IRS unless your account is subject to unrelated business taxable income, and there is no plan document to maintain.

Flexible contributions. You are not required to contribute every year, and you can vary the amount from year to year. This makes the SEP IRA a good fit for self-employed individuals with fluctuating income. In a strong year, contribute up to the maximum. In a slow year, contribute less or nothing at all.

Who the SEP IRA is best for

The SEP IRA works well for self-employed individuals who want a simple, low-maintenance retirement plan with high contribution limits. It is particularly good for sole proprietors and single-member LLCs who do not have employees. If you have employees, keep in mind that you must contribute the same percentage of compensation for all eligible employees as you contribute for yourself. This can make the SEP IRA expensive if you have a team.

The SEP IRA is also a strong choice for people who are setting up their first retirement plan and want something they can open in minutes. If the administrative requirements of a solo 401(k) feel like too much, the SEP IRA gets you most of the way there with far less paperwork.

Where the SEP IRA falls short

The biggest limitation of the SEP IRA is the lack of a Roth option. All contributions are pre-tax, so you will pay ordinary income tax on withdrawals in retirement. If tax-free growth is important to you, you will need to pair a SEP IRA with a Roth IRA or consider a solo 401(k) with a Roth feature instead.

The SEP IRA also does not allow employee deferrals. Your contribution is limited to 25% of net self-employment income, which means lower-income earners may find they can save more in a solo 401(k) thanks to the employee deferral component. For example, if your net self-employment income is $50,000, a SEP IRA allows you to contribute up to $12,500 (25%). A solo 401(k) would let you defer up to $23,000 as the employee portion alone, plus the employer contribution on top of that.

Providers to consider

Fidelity offers a SEP IRA with no account fees, no minimums, and access to a wide selection of index funds, mutual funds, and ETFs. Fidelity's platform is intuitive and well-supported.

Vanguard is a natural fit for investors who prefer low-cost index fund investing. Vanguard's SEP IRA gives you access to their renowned lineup of index funds and ETFs with some of the lowest expense ratios in the industry.

Schwab rounds out the list with a no-fee SEP IRA and the same broad investment access available through their brokerage platform. Schwab's customer service and integrated banking features are a plus for business owners who want everything under one roof.

SIMPLE IRA: a middle ground for self-employed with employees

The Savings Incentive Match Plan for Employees, or SIMPLE IRA, is a retirement plan designed for small businesses with 100 or fewer employees. It sits between the simplicity of a SEP IRA and the full-featured nature of a 401(k), and it can work for self-employed individuals who have a small team.

How the SIMPLE IRA works

A SIMPLE IRA allows both employee contributions and employer contributions. On the employee side, you can defer up to $16,000 in 2024 ($16,500 in 2025, with further adjustments expected for 2026). If you are 50 or older, you can make an additional catch-up contribution of $3,500. On the employer side, you are required to either match employee contributions dollar for dollar up to 3% of compensation, or make a flat 2% non-elective contribution for all eligible employees regardless of whether they contribute.

Mandatory employer contribution. This is the key distinguishing feature and potential drawback of a SIMPLE IRA. Unlike the SEP IRA or solo 401(k), you cannot skip the employer contribution in lean years (though you can reduce the match to 1% for up to two out of every five years). If you have employees, this ongoing obligation is something to factor into your budget.

Lower contribution limits. The total contribution limits for a SIMPLE IRA are lower than both the solo 401(k) and the SEP IRA. The combined employee deferral and employer match typically caps out well below $30,000 for most participants, which makes the SIMPLE IRA less attractive for high earners looking to maximize tax-deferred savings.

Who the SIMPLE IRA is best for

The SIMPLE IRA is best suited for self-employed individuals who have a handful of employees and want to offer a retirement benefit without the complexity and cost of a full 401(k) plan. If you are a true solopreneur with no employees, the solo 401(k) or SEP IRA will almost always be a better choice due to higher contribution limits and more flexibility.

The SIMPLE IRA can also work for self-employed individuals with moderate income who want to make both employee and employer contributions but do not need the higher limits of a solo 401(k). The setup and maintenance are straightforward, and most major brokerages offer SIMPLE IRA plans.

Limitations to keep in mind

Beyond the lower contribution limits and mandatory employer contributions, SIMPLE IRAs come with a notable penalty for early withdrawals. If you withdraw funds within the first two years of participating in the plan, the early withdrawal penalty is 25% rather than the usual 10%. After two years, the standard 10% penalty applies for withdrawals before age 59 1/2. There is also no Roth option available with a SIMPLE IRA, and rollovers to other retirement accounts are restricted during the first two years.

Traditional and Roth IRA: the universal starting point

Individual Retirement Accounts, both traditional and Roth, are available to anyone with earned income, including self-employed individuals. While the contribution limits are much lower than other self-employed plans, IRAs serve as an important building block and can be used alongside other plans.

Traditional IRA basics

A traditional IRA allows you to contribute up to $7,000 per year in 2024 ($8,000 if you are 50 or older). Contributions may be tax-deductible depending on your income level and whether you are covered by another retirement plan. If you are self-employed and do not have another retirement plan, your traditional IRA contributions are fully deductible regardless of income. If you also contribute to a SEP IRA or solo 401(k), the deductibility of your traditional IRA contributions may phase out at higher income levels.

Tax-deferred growth. Investments in a traditional IRA grow tax-deferred, and you pay ordinary income tax on withdrawals in retirement. Required minimum distributions begin at age 73.

Roth IRA basics

The Roth IRA has the same contribution limits as the traditional IRA ($7,000 per year, $8,000 if 50 or older), but the tax treatment is reversed. Contributions are made with after-tax dollars, so you get no deduction in the year you contribute. However, qualified withdrawals in retirement are completely tax-free, including all investment growth. There are no required minimum distributions during the account owner's lifetime.

Income limits. The Roth IRA has income eligibility limits. In 2024, the ability to contribute begins phasing out at $146,000 of modified adjusted gross income for single filers and $230,000 for married filing jointly. High-income self-employed individuals may be unable to contribute directly to a Roth IRA, though the backdoor Roth IRA strategy (contributing to a traditional IRA and converting to Roth) remains available.

How IRAs fit into a self-employed retirement strategy

For most self-employed workers, the traditional or Roth IRA should be a complement to a larger plan, not the primary vehicle. The $7,000 annual limit is simply too low to build substantial retirement savings on its own, especially if you are starting later in your career. However, pairing a Roth IRA with a pre-tax plan like a SEP IRA gives you tax diversification: some money grows tax-deferred, and some grows tax-free. This combination gives you more flexibility in retirement when it comes to managing your tax bracket.

If you are just getting started with self-employment and your income is modest, a Roth IRA is a strong first step. The tax-free growth is valuable when you are in a lower bracket, and you can always add a SEP IRA or solo 401(k) as your income grows.

Providers

Traditional and Roth IRAs are available at virtually every brokerage. Fidelity, Vanguard, and Schwab all offer IRAs with no account fees and broad investment options. The differences between providers at this level come down to the specific funds and tools available, customer service quality, and whether you want your IRA at the same institution as your other accounts.

Defined benefit plan: maximum tax shelter for high earners

Defined benefit plans, commonly known as pensions, are the heavyweight option in the self-employed retirement landscape. These plans allow you to contribute and deduct far more than any other retirement vehicle, often exceeding $100,000 per year and sometimes reaching $200,000 or more depending on your age and income.

How defined benefit plans work for the self-employed

A defined benefit plan promises a specific monthly benefit in retirement, calculated using a formula based on factors like your age, income, and years of service. As the plan sponsor and sole participant, you (or your actuary) determine the annual contribution required to fund that future benefit. Because the plan is designed to deliver a guaranteed payout, the required contributions can be very large, especially for older participants who have fewer years to accumulate the needed assets.

Massive tax deductions. The primary appeal of a defined benefit plan is the size of the tax deduction. A self-employed individual in their 50s or 60s with high income can potentially deduct $200,000 or more per year in contributions. No other retirement plan comes close to this level of tax sheltering.

Mandatory contributions. Unlike a SEP IRA or solo 401(k), contributions to a defined benefit plan are generally mandatory once the plan is established. An actuary determines the required contribution each year, and you must fund it regardless of your business's performance. This rigidity is the flip side of the large deduction. If your income drops or your business has a bad year, the contribution obligation remains.

Who should consider a defined benefit plan

Defined benefit plans are best suited for high-income self-employed individuals, typically those earning $300,000 or more per year, who have consistently strong income and want to shelter as much of it as possible from taxes. They are especially attractive for professionals in their 40s, 50s, and 60s who are behind on retirement savings and want to catch up aggressively.

Common candidates include self-employed physicians, attorneys, consultants, and business owners with stable, high-revenue practices. If your income fluctuates significantly from year to year, a defined benefit plan may not be the right fit due to the mandatory contribution requirement.

The complexity and cost factor

Defined benefit plans are the most complex and expensive self-employed retirement option to set up and maintain. You will need to hire an actuary to design the plan, calculate annual contributions, and prepare required filings. Actuarial fees typically range from $1,500 to $3,000 or more per year. You will also need a third-party administrator to handle plan compliance and reporting.

Despite these costs, the tax savings often far outweigh the administrative expenses for qualified candidates. If you are in a high tax bracket and can commit to funding the plan for at least several years, the net benefit can be substantial.

Combining a defined benefit plan with other plans

One strategy used by high-income self-employed individuals is to pair a defined benefit plan with a solo 401(k). This combination allows you to maximize contributions across both plans, potentially sheltering $250,000 or more per year depending on your age and income. This is an advanced strategy that requires careful coordination with an actuary and tax advisor, but it represents the upper end of what is possible for self-employed retirement savings.

How to choose the right plan for your situation

Selecting the right retirement plan depends on several factors specific to your circumstances. Here is a framework for thinking through the decision.

Consider your income level. If your net self-employment income is under $50,000, a Roth IRA combined with a SEP IRA may be the simplest and most effective combination. At this income level, the contribution limits of the SEP IRA and solo 401(k) are similar (since the solo 401(k) employer contribution is also based on 25% of net income), so the simpler SEP IRA may be sufficient.

Consider your savings goals. If you want to save more than $23,000 per year in tax-advantaged accounts, you will need a solo 401(k), SEP IRA, or defined benefit plan. If you want to save more than $69,000, a defined benefit plan (alone or combined with a solo 401(k)) is your only option.

Consider whether you have employees. If you have full-time employees other than your spouse, the solo 401(k) is off the table. A SEP IRA or SIMPLE IRA becomes the more practical choice, though remember that both require you to provide benefits to eligible employees as well.

Consider the importance of Roth contributions. If you want to make pre-tax and Roth contributions within the same plan, the solo 401(k) is the only self-employed plan (other than a standard IRA) that offers this option. The SEP IRA, SIMPLE IRA, and defined benefit plan are all pre-tax only.

Consider your tolerance for complexity. The SEP IRA and traditional/Roth IRA are the simplest to set up and maintain. The solo 401(k) adds modest complexity. The defined benefit plan requires professional assistance and ongoing actuarial involvement.

Consider your age and timeline. If you are older and behind on retirement savings, plans that allow larger contributions (solo 401(k), defined benefit plan) become more attractive. If you are younger with decades of compounding ahead of you, even modest contributions to a Roth IRA can grow substantially.

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Frequently asked questions

What is the best retirement plan for a self-employed person?

There is no single best plan for every self-employed person. The solo 401(k) is the most versatile option for solopreneurs due to its high contribution limits, Roth option, and loan feature. The SEP IRA is the simplest to set up and maintain. For high earners who want to shelter $100,000 or more per year, a defined benefit plan is the most powerful tool available. Your ideal plan depends on your income, savings goals, whether you have employees, and how much administrative complexity you are willing to manage.

Can I contribute to both a SEP IRA and a solo 401(k)?

Technically yes, but the contribution limits are shared and coordinated in ways that typically make running both plans unnecessary. The employer contribution limit applies across plans, so contributing to both does not increase your overall limit. In most cases, choosing one or the other makes more sense. Consult with a tax advisor if you are considering both.

How much can a self-employed person contribute to a solo 401(k) in 2026?

The IRS adjusts contribution limits annually for inflation. In 2024, the total solo 401(k) limit was $69,000 ($76,500 with catch-up contributions for those 50 and older). The employee deferral portion was $23,000. Limits for 2025 and 2026 are expected to be in a similar range or slightly higher. Check the IRS website for the most current figures.

Is a SEP IRA or solo 401(k) better for self-employed?

It depends on your priorities. The solo 401(k) offers a Roth option, a loan feature, and potentially higher contributions at lower income levels (due to the employee deferral component). The SEP IRA is simpler to set up and has no annual filing requirements. If you earn less than roughly $200,000 and want to maximize contributions, the solo 401(k) typically allows you to save more. If simplicity is your top priority, the SEP IRA is hard to beat.

Can I have a solo 401(k) and a Roth IRA at the same time?

Yes. There is no rule preventing you from contributing to both a solo 401(k) and a Roth IRA in the same year, as long as you meet the income eligibility requirements for the Roth IRA. This is a common and effective strategy that gives you both pre-tax savings (through the solo 401(k)) and tax-free growth (through the Roth IRA).

What happens to my solo 401(k) if I hire employees?

If you hire full-time employees who are not your spouse, you can no longer maintain a solo 401(k). You would need to convert to a standard 401(k) plan, which involves more complex administration, or switch to a SEP IRA or SIMPLE IRA that covers your employees as well.

What is the deadline for setting up a solo 401(k)?

You must establish a solo 401(k) plan by December 31 of the tax year for which you want to make employee deferral contributions. However, you have until your tax filing deadline (including extensions) to make employer contributions. For a SEP IRA, both the plan setup and contributions can be made by your tax filing deadline, including extensions.

Can I set up a self-employed retirement plan if I also have a W-2 job?

Yes. If you have self-employment income in addition to a regular W-2 job, you can set up a SEP IRA or solo 401(k) for your self-employment income. However, employee deferral limits (the $23,000 limit in 2024) are shared across all 401(k) plans, including your W-2 employer's plan. So if you max out your employee deferrals at your day job, you can only make employer contributions to your solo 401(k) based on your self-employment income.

Are there penalties for withdrawing from a self-employed retirement plan early?

Yes. Most self-employed retirement plans follow the same early withdrawal rules as their standard counterparts. Withdrawals before age 59 1/2 are generally subject to a 10% early withdrawal penalty plus ordinary income tax. SIMPLE IRAs impose a 25% penalty for withdrawals within the first two years of plan participation. Roth IRA contributions (not earnings) can be withdrawn at any time without penalty, since they were made with after-tax dollars.

What is a defined benefit plan and is it worth it for self-employed?

A defined benefit plan is a pension-style retirement plan that allows very large tax-deductible contributions, often exceeding $100,000 per year. It is worth considering if you are a high-income self-employed individual (typically earning $300,000 or more), are in your 40s or older, and want to aggressively reduce your tax burden while catching up on retirement savings. The plan requires an actuary and has mandatory annual contributions, so it is best suited for people with stable, predictable income.

Do I need an EIN to set up a solo 401(k)?

Yes. Unlike a SEP IRA (which sole proprietors can sometimes open with just a Social Security number), a solo 401(k) requires an Employer Identification Number (EIN) from the IRS. Obtaining an EIN is free and can be done online in minutes through the IRS website.

Can my spouse participate in my solo 401(k)?

Yes, if your spouse works in your business and earns income from it. Your spouse can make their own employee deferrals (up to $23,000 in 2024) and receive employer contributions, effectively doubling the amount your household can save through the plan. This makes the solo 401(k) especially powerful for couples who work together in a business.

This content is for informational purposes only and should not be construed as financial, tax, or legal advice. Retirement plan rules and contribution limits are subject to change, and individual circumstances vary. Consult with a qualified financial advisor, tax professional, or attorney before making decisions about retirement plans. Investment returns are not guaranteed, and past performance does not predict future results.