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Best Retirement Plans for the Self-Employed

retirement plans for the self-employed
2 Minute Read

When you work for a big company, there are a lot of decisions that are made for you: who you work with; the corporate goals and priorities; what your company’s retirement plan is; what your company does for health care.

As an entrepreneur you get to be your own boss and be in control of much more of your own life.

It’s an amazing thing to be your own boss. You can set your own hours, your own rates, and approve of the people you work with directly. But it offers certain challenges as well, such as what to do for your retirement planning.

You know you should contribute regularly, making it a priority and establishing your long-term financial health. But what are your options when you’re self-employed?

Retirement Plans for the Self-Employed: Solo 401(k)

A quick internet search will show one of the best retirement plans for the self-employed is the Solo 401k.

What is it and how does it work?

Let’s tackle that first question:

What is a Solo 401k?

A Solo 401k works the same way as a traditional 401k does, but is specifically designed for someone who is self-employed and has no employees besides themselves, and a spouse.

Popularity for the plan increased back in 2001, when the Economic Growth Tax Relief Reconciliation Act (EGTRA) came into effect. This act revamped the Solo 401(k), adding on attractive features, such as changing how salary deferral contributions are treated when calculating the maximum deduction limits for contributions to a 401(k).

Can I have a full-time job and use the Solo 401(k)?

If you have a regular 9-to-5 but still generate some form of self-employment income, you can establish a Solo 401(k) plan, as it meets one of the two eligibility requirements: the presence of self-employment income.

Now let’s tackle that second question:

How Does it Work?

Also known as the one-participant plan, in order to be eligible for the Solo 401k, you cannot have employees who work full-time and you must generate some form of self-employed income.

Self-employment can include freelance writing or Uber driving. In fact, there are many jobs that will generate self-employment income and allow you to establish the plan.

Higher Contributions

The Solo 401k plan allows you to make contributions as both the employer and employee, up to $56,000. And you have a $6,000 catch-up contribution if you meet the age threshold of age 50 or above.


Other options for the self-employed include the SEP IRA, which is a Simplified Employee Pension and also allows you to put money away for yourself, but with no one else available. Your contributions can amount to 20% of your income and there are some changes year to year.


A Savings Incentive Match Plan for Employees (SIMPLE) IRA allows companies with fewer than 100 employees to make contributions to their retirement. Contribution rates can be lower and this type of account is subject to additional rules.

Roth IRA

A Roth IRA allows contributions but they are not tax-deductible and are subject to additional IRS administrative laws.

Key Takeaway

In the end, the best retirement option for you depends not only on what you’re saving for, but what you’ll actually contribute to. No retirement plan is helpful if you don’t set up regular payments to yourself for your own stable financial future.

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[10:44 PM] Valerie Marszalek-Boik