Retirement Plans for Self-Employed People

How to save for retirement if you don’t have access to an employer-sponsored retirement plan.

By Fisher Investments, Updated 6/20/2023

If you are self-employed, work somewhere that doesn’t offer a retirement plan, or (who knows?) have already reached your 401(k) contributions limit for the year and have extra savings to put towards retirement, deciding where to invest for retirement can feel daunting. However, a 401(k) is far from the only way to save. Here is some basic information that can help you get started.

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Determine How Much to Save

The type of retirement investment vehicles you use is largely irrelevant if you do not make a habit of putting money aside for the future. First, establish how much you want to pay yourself. It could be 5%, 10%, 20% or more of what you earn. Just find your number and stick with it. Unexpected expenses this month? Pay yourself first. This mindset is simple in theory, but can be difficult in execution. However, it’s critical to pay yourself first in order to save for retirement when self-employed.

Retirement Plans for Small Business Owners

Although the 401(k) is perhaps the best-known retirement savings plan, it isn’t as universal as you might expect. According to the US Bureau of Labor Statistics, in 2021, close to one-third of private industry workers did not have access to retirement benefits through their employer. But, fear not—there are plenty of other options available. Please note, the following are account types that, unless we state otherwise, can hold many different types of investments: stocks, bonds, mutual funds, exchange-traded funds and more. So finding which of these account types fits your circumstances shouldn’t be constrained by the investments you choose..

Traditional IRA vs. Roth IRA for Self-Employed Individuals

This is just your good old-fashioned individual retirement account. Many people use it as a retirement-savings supplement, even if they have a 401(k)—and anyone can open one. There are two major types: traditional IRAs and Roth IRAs.

In a traditional IRA, contributions are generally tax-deductible and growth isn’t taxed until retirement withdrawals. These withdrawals are typically taxed at the IRA owner's current income tax rate. Roth IRA contributions are not deductible, but growth isn’t subject to income tax. If you withdraw from either a traditional or a Roth IRA before age 59 ½, you’ll likely face tax penalties from the IRS. The annual contribution limits are lower than for 401(k)s—$6,500 instead of $22,500. But, those over age 50 are eligible for additional “catch-up” contributions of $1,000 per year.


Some smaller firms that don’t offer a 401(k) plan set up SIMPLE IRAs on behalf of their employees who can’t do so independently. SIMPLE is an acronym that stands for “Savings Incentive Match Plan for Employees.” A business owner may also participate in a SIMPLE IRA. Companies must contribute either 2% of the enrollee’s salary, regardless of employee contributions, or fully match the employee’s contributions dollar-for-dollar up to 3% of the worker’s pay. The IRS website is a good resource for more detail on this or any other retirement plan option.

Contribution limits are $15,500 per year as of 2023, plus another $3,500 in annual “catch-up” contributions for those over age 50. They’re simpler to set up and run than 401(k)s, which is why they’re more popular for smaller businesses. But, contributions are capped far below those of SEP IRAs.


SEP stands for "Simplified Employee Pension." Like a SIMPLE IRA, it is designed for small-business owners with one or more employees. Freelancers are also eligible. While money accrues for employees, employees may not contribute themselves—only employers.

As with a traditional IRA, the money isn’t taxed until withdrawal. SEP IRAs also have a much higher contribution limit than other IRAs—up to $66,0001 or 25% of compensation as of 2023, whichever is lower. They are comparatively simple to set up, and allow employers to contribute widely varying amounts each year—a feature companies with fluctuating revenues often appreciate.

1 Technically, this $66K limit applies to all defined contribution plans a person might have, which means you can’t put $66,000 into your SEP IRA while also contributing to (for example) a 401(k).

Self-Employed Profit-Sharing Plans

These retirement plans share many similarities with SEP IRAs: Employers contribute on employees’ behalf, and companies choose how much they wish to contribute. And if profits are suffering, contributing “nothing at all” is an option.

Earnings accrue tax-deferred, and employees are free to use other retirement savings accounts at the same time. There is one main difference: With SEP IRAs, the company can contribute up to 25% of a worker’s salary (as long as it’s $66,000 or less); under profit-sharing plans, the company can contribute up to 25% of its payroll costs to employees as a whole, which means individual workers could receive more than 25% of their salary in plan contributions.

Individual (or “Solo”) 401(k)s

These retirement plans are limited to sole proprietorships (businesses with an owner, but no employees), and come in both traditional and Roth versions. The contribution limits are much higher than with standard 401(k)s, because the contributor counts both as an employee and an employer (which have a combined annual contribution limit of $66,000 in 2023), plus an additional catch-up allotment of $6,500 each once you hit age 50 as of 2023.

Solo 401(k)s carry more paperwork than SEP IRAs, though, and many custodians charge additional fees to set up and maintain them.

Keogh Plans

Keogh plans are another option for the self-employed. There are two kinds: defined-benefit and defined-contribution. The defined-benefit variety states the annual sum you’ll receive upon retirement, which is usually based on salary and tenure, and then you fund your own plan accordingly—hence its appeal for high earners.

The defined-contribution version works like a SEP IRA, but with the added option of locking in a set percentage of your salary as a contribution. Now, there is a lot of paperwork and complexity here, so the aid of a tax adviser is indispensable.

The contents of this page should not be construed as tax advice. Please contact your tax professional. All contribution limits listed here are as of the tax year 2023.

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