Self-employed workers actually have access to higher annual retirement contribution limits than corporate W-2 employees. The two dominant choices are the SEP-IRA and the Solo 401(k).

Solo 401(k) Advantages

  • Higher Contributions at Lower Incomes: You can contribute as an "employee" (up to $23,000 in 2024; $23,500 in 2025) PLUS up to 20% of net profit as the "employer." Total cap is $69,000 ($70,000 in 2025).
  • Roth Option Available: Many Solo 401(k) providers allow designated Roth employee deferrals for tax-free retirement withdrawals.
  • Loan Provisions: Allows borrowing up to 50% of the account value (max $50,000) for emergencies.

SEP-IRA Advantages

  • Minimal Paperwork: Takes 5 minutes to set up at Vanguard, Fidelity, or Schwab with no annual IRS Form 5500 filings.
  • Retroactive Setup: Can be opened and funded up until your tax filing deadline (including extensions).