When you’re your own boss, saving for retirement can easily fall to the bottom of your to-do list. Especially if you don’t plan ahead like a large company.
But even if you’re self-employed, there are still plenty of ways to plan for retirement, says Kashif Ahmed, a certified financial planner and president of American Private Wealth in Bedford, Massachusetts.
“You don’t have to say, ‘Oh my god, my life sucks because I don’t work for IBM or Microsoft and my friends do,'” Ahmed says. By opening your own retirement account, you “get the exact same tax benefits.”
Here are two options to consider.
1. September Islay
For self-employed people or small business owners with a few employees, a simplified employee pension individual retirement account may be the best place to start, as the account is relatively easy to open at a financial institution and has low administrative requirements, says Ahmed.
“The benefit of SEP is that you can just fill out an (Internal Revenue Service) form and it’s available right away,” Ahmed says.
With a SEP IRA, contributions are tax-deductible and investment growth is tax-deferred while in the account. All withdrawals are considered taxable income and may be subject to a 10% penalty if taken before age 59 1/2.
Each year, employers can contribute up to 25% of an employee’s compensation, capped at $70,000 per person in 2025 and $72,000 in 2026, although some compensation limits apply to this calculation. If you are self-employed, the 25% contribution limit for a SEP IRA is based on your net income from self-employment (business income less expenses and half of self-employment taxes).
Only employers can make contributions, and contributions are always 100% vested. This differs from some employer-sponsored plans, such as 401(k)s, which require you to work for a company for a certain period of time before the employer-contributed funds become fully yours.
If you employ more employees than yourself, you must contribute the same percentage of their salaries to the accounts of all eligible employees.
2. Solo 401(k)
Another tax-advantaged account you can open if you’re self-employed with no employees is a one-participant 401(k), often called a solo 401(k) or individual 401(k).
Solo 401(k)s may even be easier to manage than SEP IRAs because you don’t have to calculate contribution limits, says Malcolm Ethridge, CFP, CNBC On-Air Contributor, and managing partner at Capital Area Planning Group in Washington, D.C.
“From a young person’s perspective, especially young people who tend to prefer less complex, do-it-yourself type models, solo 401(k)s offer the ability to literally do everything yourself through an online brokerage,” Ethridge says.
Similar to a SEP IRA, a traditional solo 401(k) offers tax deductions on contributions and tax-deferred growth on investments. Alternatively, you can open a Roth Solo 401(k). It is funded with contributions you have already paid taxes on and provides tax-free withdrawals upon retirement or in certain other eligible circumstances.
As an employee, you can contribute up to $23,500 in 2025 and $24,500 in 2026. Additionally, if you’re 50 or older, you can make additional catch-up contributions of $7,500 in 2025 and $8,000 in 2026.
As an employer, you can also use the profits you make from your business to pay additional contributions of up to 25% of your remuneration. Total contributions from you as an employee and your company as an employer are limited to $70,000 in 2025 and $72,000 in 2026.
Once your Solo 401(k) balance reaches $250,000, the IRS requires you to submit an annual form reporting your plan assets, contributions, and basic plan information. You are also responsible for keeping your plan documents up to date in case the IRS issues amendments.
There are no hacks. Just start saving
Whether you choose a SEP IRA, solo 401(k), or other type of retirement account, the most important step is simply opening an investment account, says Ahmed.
Too many people waste time trying to figure out which option will give them the biggest tax break or the perfect “hack” to make more money, he says. The key is to start investing to benefit from the compound growth that occurs over time.
“Here’s a hack. Just do it,” says Ahmed. “Financial security is absolutely possible. It’s all about discipline.”
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