Being self-employed means no employer 401(k) and no match. It also means you get to be the employer, and the plans written for that role let you shelter far more than a plain IRA. The three that matter for most freelancers and small-business owners are the SEP-IRA, the solo 401(k) and the SIMPLE IRA. Here is how they compare under the 2026 limits; the full table is in 2026 Retirement Limits: 401(k) Rises to $24,500, IRA to $7,500.

SEP-IRA: the simplest, funded by the employer only

A Simplified Employee Pension is a traditional IRA with a bigger door. Only the business contributes, up to 25% of compensation, with a 2026 ceiling of $72,000 and a compensation cap of $360,000. Contributions are pre-tax and discretionary: they can vary from year to year, including zero in a lean year. The catch for the self-employed is the definition of compensation: it is net earnings from self-employment minus half your self-employment tax minus the SEP contribution itself, worked through the rate table in IRS Publication 560. The effect is that a 25% plan rate equals about 20% of net self-employment earnings. On $100,000 of net earnings, that is roughly $20,000.

A SEP can be opened and funded as late as the due date of your return, including extensions, which makes it the plan you can still set up after the year is over. Under SECURE 2.0, SEP contributions can go into a Roth IRA if your provider offers that election (it is not required to); a Roth SEP contribution is taxable income in the year it is made. If you have employees, a SEP must cover eligible workers, including anyone who earned at least $800 in 2026, on the same terms as the owner.

Solo 401(k): the most room at moderate incomes

A one-participant 401(k) is what the name says: a plan for a business owner with no employees to cover. Its advantage is that you contribute twice, wearing both hats:

  • As employee: elective deferrals of up to 100% of compensation, capped at the 2026 deferral limit of $24,500. Savers 50 and older can add an $8,000 catch-up, for $32,500; those aged 60 to 63 get a higher $11,250 catch-up instead.
  • As employer: up to 25% of compensation as defined for the plan, computed on the same Publication 560 worksheet a SEP uses.

Total contributions are capped at the $72,000 annual additions limit, not counting catch-ups. Run the same $100,000 illustration: the employer share is about $20,000, the employee deferral adds $24,500, and the total is $44,500, more than double what a SEP allows on the same income. If the plan document allows Roth deferrals, the employee share can go in after tax and grow tax-free.

Housekeeping matters more here than with a SEP. Once plan assets exceed $250,000 at year-end you must file Form 5500-EZ. A plan can generally be adopted as late as your tax-filing due date including extensions, but Publication 560 warns that certain 401(k) plans have expedited deadlines, and the employee deferral has its own rule: under SECURE 2.0, a sole proprietor or single-member LLC that adopts a new plan after year-end can still make first-year elective deferrals up to the owner’s tax-filing deadline; check with your provider whether an extension counts. Two practical points follow. The $24,500 deferral limit is per person across every 401(k) you participate in, so if you already max a day-job plan, a side-business solo 401(k) adds only the employer share. And the plan stops being one-participant the day you hire an employee, at which point the choice becomes a regular 401(k) or one of the other two plans.

SIMPLE IRA: built for small teams, lower ceiling

A Savings Incentive Match Plan for Employees is a low-paperwork plan for a business with employees: staff defer their own pay and the employer either matches up to 3% of compensation or contributes 2% for every eligible employee whether or not they defer, on compensation up to $360,000. The 2026 deferral limit is $17,000, with a $4,000 catch-up at 50 and older and a $5,250 catch-up for ages 60 to 63. Employers with 25 or fewer employees automatically get a higher SECURE 2.0 deferral limit of $18,100 in 2026; employers with 26 to 100 employees can elect it but must then match 4% or contribute 3%. Employers may also add a nonelective contribution of up to 10% of compensation, capped at $5,000 per employee. Roth SIMPLE contributions are allowed if the employer offers the election.

For a solo operator the ceiling is the problem: on the $100,000 illustration, $17,000 in deferrals plus a 3% match of $3,000 is about $20,000, roughly what a SEP allows and less than half the solo 401(k). Its natural home is a small team where the owner wants staff saving too without the cost of a full 401(k).

Which one

  • Choose the SEP if you want the least paperwork, the ability to decide after year-end, and contributions you can skip in a bad year, and either you have no employees or you are willing to fund them on the same terms.
  • Choose the solo 401(k) if you have no employees and want the maximum shelter at a moderate income, or if Roth deferrals matter to you.
  • Choose the SIMPLE if you have a small team and want them saving too, and the lower ceiling does not bind.

Do not forget the plain IRA

None of these plans stops you from also funding an IRA. The 2026 limit is $7,500, or $8,600 at 50 and older. A Roth IRA is the useful complement: contributions go in after tax, earnings come out tax-free in retirement, and the contributions themselves can be withdrawn at any time without tax or penalty. The ability to contribute directly phases out between $153,000 and $168,000 of modified adjusted gross income for single filers and between $242,000 and $252,000 for married couples filing jointly in 2026. Whether a traditional IRA contribution is deductible on top of a business plan depends on income; the details are in IRS Publication 590-A, which, with Publication 590-B for withdrawals, replaced the old single Publication 590. The rules for all three self-employed plans are in Publication 560, and where retirement saving fits in the rest of your plan is in our saving and banking guide.

Whichever you choose, mind the deadlines above and revisit the choice the year you hire someone. Self-employment took away the employer match. These plans give it back, provided you pay it.