If you’re self-employed, nobody is automatically enrolling you in a 401(k), so building retirement savings is entirely on you to set up.
Part of our guide: Retirement Planning.
IRAs: The Baseline Option
Traditional and Roth IRAs are individual accounts you open and own regardless of who you work for. With a Roth IRA, you contribute after-tax dollars, your earnings grow tax-free, and qualified withdrawals after age 59½ are tax-free. Income limits can make you ineligible to contribute directly, and it tends to make the most sense if you expect to be in a higher tax bracket later. A traditional IRA works the other way: pre-tax contributions, tax-deferred growth, and taxes owed on withdrawals in retirement, which fits better if you expect a lower tax bracket down the line or your income is above the Roth limits. Contribution limits change every year, so check the current figures on IRS.gov before you set your contribution.
SEP-IRAs and Solo 401(k)s for More Contribution Room
A SEP-IRA works like a traditional IRA (pre-tax in, taxed on withdrawal) but allows significantly higher contributions, calculated as a percentage of your income up to an annual IRS cap. If you have employees, you have to contribute on their behalf at the same percentage rate you use for yourself, which is why SEP-IRAs are mainly used by solo business owners rather than companies with staff.
A solo 401(k) is available if you have no employees (your spouse can participate if they earn income from the business). Because you’re both the employee and the employer of your own business, you can contribute in both capacities, which generally makes it the account with the most contribution room of the options here. As with IRAs, the exact dollar limits are set annually by the IRS and worth checking before you contribute.
SIMPLE-IRAs for Small Teams
If you run a business with fewer than 100 employees, a SIMPLE-IRA is a lower-administrative-burden option. The employer is required to contribute, either a flat percentage of each employee’s compensation or a dollar-for-dollar match up to a percentage cap, regardless of whether the employee contributes.
HSAs as a Backdoor Retirement Account
If you’re on a high-deductible health plan, a Health Savings Account carries a genuine triple tax benefit: contributions go in pre-tax, the balance grows tax-deferred, and withdrawals for qualified medical expenses come out tax-free. You can invest the balance rather than let it sit in cash. Once you turn 65, you can withdraw for any reason without a penalty, though non-medical withdrawals are taxed as ordinary income at that point, which functions a lot like a second IRA with better tax treatment on the medical side.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
