Choosing the Right Retirement Account When You’re Your Own Boss
Freelance Freedom, Smart Savings: Find the Right Retirement Account for You
When you work for yourself, saving for retirement might not feel urgent — but it’s just as important (if not more so!) than if you worked for a company.
The good news? You have more control over your retirement savings options.
The challenge? Choosing the right account for your goals, income, and lifestyle.
Let’s break it down simply so you can start building the financial future you deserve.
Your Main Retirement Account Options
When you’re self-employed, the most common retirement accounts are:
- Traditional IRA
- Roth IRA
- SEP IRA
- Solo 401(k)
- SIMPLE IRA
Each has different rules, contribution limits, and flexibility — which matters a lot when your income isn’t the same every month.
Traditional IRA and Roth IRA
Good for: Freelancers, gig workers, and anyone self-employed — especially when just starting out.
Contribution Limit (2025):
- Up to $7,000 a year
- Plus $1,000 extra if you’re age 50 or older
Pros:
✅ Easy and fast to open typically
✅ Low (or no) minimum to get started
✅ Great for smaller savings goals while you’re growing your income
✅ Tax advantages depending on whether you choose Traditional (tax-deductible) or Roth (tax-free growth*)
✅ Many states now offer automatic IRA programs for self-employed workers—making it even easier to begin saving (see chart later in this post)
*Tax-free withdrawals from a Roth account are generally available if the account has been held for at least five years and the account holder has reached age 59½, whichever occurs later. Additional conditions may apply. Consult a qualified tax professional for guidance specific to your situation.
Cons:
❌ Contribution limits are lower than other self-employed retirement options, like SEP or Solo 401(k)s
❌ Income limits may reduce or eliminate your ability to deduct Traditional IRA contributions or to contribute to a Roth IRA, depending on how much you earn and your tax filing status
Best for:
If you’re just getting started or want to build your savings before jumping into more complex plans.
👉 Important: If you’re not yet maxing out your IRA, stop here. Focus your efforts on reaching that limit first before exploring other retirement plan options. It’s a strong foundation that sets the stage for more advanced strategies later.
Many states now offer automatic IRA programs to help self-employed individuals and small business owners get started—see the chart later in this post for a breakdown of what’s available in your state.
Reference: IRS Contribution Limits for IRAs website
SEP IRA (Simplified Employee Pension)
Good for: Self-employed individuals or small business owners with a few employees.
Contribution Limit (2025):
- Up to $70,000 or 25% of net earnings (whichever is less)
Pros:
✅ Higher contribution limits than an IRA
✅ Very flexible: you don’t have to contribute every year
✅ Easy to set up and low maintenance
Cons:
❌ No employee salary deferrals — only employer contributions (that’s you!)
❌ If you have employees, you must contribute the same percentage for them too
Best for:
If you want an easy way to save more in a strong year without locking yourself into mandatory contributions.
Reference: IRS SEP IRA website
Solo 401(k)
Good for: Self-employed individuals with no employees (except a spouse).
Contribution Limit (2025):
- Up to $70,000 (plus catch-up contributions if 50+)
- Made up of “employee” salary deferrals and “employer” profit-sharing contributions
Pros:
✅ Highest savings potential of all options
✅ You can make both salary deferrals and profit-sharing contributions
✅ Allows loans from the plan if needed
✅ Works alongside other retirement plans to maximize retirement savings
Cons:
❌ More paperwork to set up
❌ Annual IRS filing (Form 5500) required if assets exceed $250,000
❌ Not ideal if you plan to hire employees (other than a spouse)
Best for:
If you want to save aggressively, can handle a little extra paperwork, and plan to stay self-employed solo.
Reference: IRS One Participant 401k Plans website
SIMPLE IRA (Savings Incentive Match Plan for Employees)
Good for: Small businesses with employees, but also available for sole proprietors.
Contribution Limit (2025):
- Up to $16,500 in employee contributions (plus $3,500 catch-up if 50+)
- Mandatory employer matching contributions
Pros:
✅ Easy and inexpensive to set up
✅ Higher employee contribution limits than a Traditional or Roth IRA
✅ Good option if you have employees
Cons:
❌ Lower limits compared to 401(k) and SEP IRA
❌ Required employer match or contribution
❌ Less flexible if income is unpredictable
Best for:
If you have (or plan to have) a small team and want a low-cost retirement plan with less administration than full 401k.
Reference: IRS SIMPLE IRA website
How Contribution Limits and Flexibility Matter for Variable Income
When you’re self-employed or living off gigs, flexibility is everything.
- If you have high and low income months:
Choose a plan that lets you save more when you can and less when you need to — like a SEP IRA or Solo 401(k). - If you want to start small:
A Traditional or Roth IRA is an easy on-ramp to get your retirement savings rolling. - If you have employees, or plan to hire:
Look at SIMPLE IRAs or consider setting up a full 401(k) down the line.
What About State-Run IRA Programs?
If you’re self-employed or work for a small business that doesn’t offer a retirement plan, your state might already have a solution for you: a state-facilitated retirement savings program.
These programs — often called Auto-IRAs — automatically enroll workers into a retirement account (usually a Roth IRA) through payroll deduction. Participation is easy, the fees are generally low, and you can take your account with you if you change jobs.
👉 Important: Each state program is a little different. Some are mandatory for employers to offer; others are voluntary.
If you’re interested, it’s a great idea to check out what’s available in your state!
State-Run IRA Programs: What’s Available in Your State?
| State | Program Name | Website | Automatic or Voluntary? | Status / Year Implemented or Expected |
| California | CalSavers | https://www.calsavers.com | Automatic | Active / 2019 |
| Colorado | Colorado SecureSavings | https://www.coloradosecuresavings.com/ | Automatic | Active / 2023 |
| Connecticut | MyCTSavings | https://www.myctsavings.com/ | Automatic | Active / 2022 |
| Delaware | Delaware EARNS | https://earnsdelaware.com | Automatic | Active / 2024 |
| Hawaii | Hawaiʻi Retirement Savings Program | https://labor.hawaii.gov/hrsp/ | Voluntary | In Development |
| Illinois | Illinois Secure Choice | https://www.ilsecurechoice.com/ | Automatic | Active / 2018 |
| Maine | MERIT | https://meritsaves.org/ | Automatic | Active / 2024 |
| Maryland | Maryland $aves | https://marylandsaves.com | Automatic | Active / 2022 |
| Minnesota | Minnesota Secure Choice Retirement Program | https://mn.gov/scrb/ | Automatic | In Development / 2026 expected |
| Nevada | Nevada Employee Savings Trust (NEST) | https://www.nevadatreasurer.gov/NEST/ | Automatic | In Development / 2025 expected |
| New Jersey | Retire Ready NJ | https://www.nj.gov/treasury/securechoiceprogram/ | Automatic | Active / 2024 |
| New Mexico | NM Work and Save | nmsto.gov/work-and-save | Automatic | In Development |
| New York | NY Secure Choice Savings Program | https://www.securechoice.ny.gov/ | Automatic | In Development |
| Oregon | Oregon Saves | https://www.oregonsaves.com/ | Automatic | Active / 2017 |
| Rhode Island | RI Savers | https://treasury.ri.gov/risavers | Automatic | In Development / 2025 expected |
| Vermont | Vermont Saves | https://www.vtsaves.vermont.gov/ | Automatic | Active / 2025 |
| Virginia | RetirePath Virginia | https://www.retirepathva.com/ | Automatic | Active / 2023 |
| Washington | Retirement Marketplace | https://retirement-marketplace.com/ | Automatic | In Development / 2027 expected |
*Chart last updated June 2025
Key Definitions:
- Automatic (Mandatory): Employers without a retirement plan are required to enroll employees into the state-facilitated IRA program, with employees having the option to opt out.
- Voluntary: Employers can choose to participate in the program; there is no mandate.
State Programs and Resources:
For more details, you can also explore the full list and program FAQs at the Georgetown Center for Retirement Initiatives.
Choosing the right retirement plan when you’re your own boss is about balancing how much you want to save with how simple you want it to be.
Starting somewhere — even with small amounts — puts you ahead of the game. The best plan is the one you actually use!
