Retirement Savings Options for the Self-Employed

Why Retirement Savings Still Matter When You Work for Yourself

Leaving a traditional job often means leaving behind an employer-sponsored retirement plan. But going self-employed does not mean giving up on building retirement savings. Several tax-advantaged accounts are available specifically for self-employed individuals and small business owners.

Whether you plan to retire early or work well past the traditional retirement age, having a savings strategy in place matters. The good news: some self-employed accounts come with higher contribution limits than standard workplace plans.

Solo 401(k): High Limits for Solo Workers

A self-employed 401(k) — sometimes called a solo 401(k) — is designed for business owners who have no employees other than themselves or a spouse.

Because you contribute as both the employer and the employee, the limits are high:

• Up to $70,000 for tax-year 2025
• Up to $72,000 for tax-year 2026

If you are over age 50, you can add an extra catch-up contribution:

• $7,500 in 2025
• $8,000 in 2026

If you are between ages 60 and 63, an even higher catch-up amount applies — $11,250 in additional contributions for 2025.

Contributions can be made on a tax-deferred basis (traditional) or tax-free basis (Roth), depending on the plan setup.

SEP IRA: Simple Option for Individuals and Small Teams

A Simplified Employee Pension, or SEP IRA, works well for self-employed individuals or small businesses with one to four employees.

Key features:

• Contributions grow tax-deferred
• Contribution limits match the solo 401(k): up to $70,000 for 2025 and $72,000 for 2026
• Relatively simple to set up and maintain

A SEP IRA can be a strong choice if you want high contribution limits without the administrative complexity of a full 401(k) plan.

SIMPLE IRA: Built for Small Businesses with Employees

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is designed for small businesses with fewer than 100 employees.

As the employer, you must choose one of two contribution approaches:

• A mandatory matching contribution of up to 3% of each employee's compensation, or
• A non-elective contribution of 2% of compensation for all eligible employees

Contribution limits for a SIMPLE IRA are lower than those of a solo 401(k) or SEP IRA, so it may be better suited for businesses that want to offer a retirement benefit without the higher funding requirements.

Other Account Options Worth Knowing

Fidelity Advantage 401(k): This is a pooled employer plan aimed at growing small businesses. It offers the higher contribution limits and employer match of a standard 401(k), but with a simpler plan design and reduced administrative work.

Traditional IRA or Roth IRA: If you are not yet ready to open a business retirement plan, a traditional IRA or Roth IRA can be a solid starting point. These accounts are available to individuals regardless of employment status and offer their own tax advantages.

Always confirm current contribution limits and eligibility rules with a qualified financial professional or the IRS, as rules can change year to year.

Using a Health Savings Account (HSA) for Long-Term Savings

If you are enrolled in an HSA-eligible health plan, a Health Savings Account (HSA) can serve as an additional long-term savings tool — not just a way to cover near-term medical bills.

For self-employed workers, HSA contributions can save 15.3% in taxes because you are paying as both employer and employee.

Three key benefits of an HSA:

• Triple tax advantage — Contributions may be tax-deductible, qualified medical expenses can be paid tax-free, and any investment growth is also tax-free.
• Investable — Unused HSA funds can be invested, potentially helping offset future health care costs in retirement.
• Not use-it-or-lose-it — Unlike a Flexible Spending Account (FSA), HSA balances roll over from year to year. The account stays with you even if you change insurance or move.

An HSA can be a powerful complement to a retirement account, especially given that health care is one of the largest expenses retirees face.