Retirement Plans Options for the Self Employed

Retirement Plans Options for the Self-Employed

By Robin Hartill, CFP – Updated Nov 18, 2025 at 7:03 PM

Key Points

SEP-IRAs have high contribution limits, but you'll need to contribute the same salary percentage for yourself and employees.
Solo 401(k)s offer high limits and catch-up contributions, but you can't have one if you employ people other than your spouse.
SIMPLE IRAs are good for small businesses because they're easy to manage and have higher limits than personal IRAs.

A number of retirement plans are available to business owners, independent contractors, and people who work for themselves outside of traditional employment.

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An infographic listing 6 different retirement plan options for the self-employed. — Image source: The Motley Fool

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These plans provide tax advantages for contributions, but each has different rules, requirements, and contribution limits. It’s important for the self-employed and those working in the gig economy to choose the type (or types) most suitable for their needs and follow IRS rules for contributions.

Self-employed people can also contribute to a taxable brokerage account, but such accounts don’t give you the same tax advantages as these plans.

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3. SIMPLE IRAs

SIMPLE IRAs are fairly easy to administer, and they have a larger contribution limit than traditional or Roth IRAs. You are eligible for a SIMPLE IRA as a self-employed worker or if you have a business with up to 100 employees.

Both employees and employers can contribute to an individual’s SIMPLE IRA:

Employee contributions are limited to 100% of salary or $17,000 in 2026 ($16,500 in 2025), whichever is less. However, some workers (mostly those employed by smaller companies) are eligible for slightly higher limits of $18,100 in 2026 ($17,600 in 2025).
Catch-up contributions are also allowed for those 50 and over in the amount of $4,000 in 2026 ($3,500 in 2025), or $3,850 for those eligible for the higher contribution limit in both 2025 and 2026. Workers ages 60 to 63 have a larger catch-up contribution limit of $5,250 in both 2025 and 2026.
Employers may choose one method: fixed contributions of 2% of employee compensation on earnings of up to $360,000 in 2026 ($350,000 in 2025), or matching contributions of up to 3% of employee compensation.

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5. Profit-Sharing Plans

Profit-sharing plans give workers a share of company profits based on either quarterly earnings or annual earnings. Businesses of any size can create a profit-sharing plan, and these plans can be created in addition to other retirement plans -- but there is a high administrative burden.

As a business owner, you can choose whether to contribute to employee profit-sharing plans, but cannot discriminate in favor of highly compensated employees. These plans are often linked with 401(k) plans, but only employers contribute to profit-sharing plans. You can make contributions based on a set formula that you establish, with maximum contributions up to whichever of the following is lowest:

25% of compensation
$72,000 in 2026 ($70,000 in 2025) plus catch-up contributions

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6. Money Purchase Plans

Money purchase plans differ from profit-sharing plans because employers are required to contribute for plan participants and contributions are not variable from year to year based on company profitability. When you establish this plan, you must establish the contribution rate.

Money purchase plans have a high administrative burden, but a pre-approved plan can be easier to establish. You can contribute as an employer with maximum contributions equaling whichever of the following is lowest:

25% of compensation
$72,000 in 2026 ($70,000 in 2025) for those under 50. Anyone 50 or older is also eligible for catch-up contributions.

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Pick the best self-employed retirement plan for you

The best self-employed retirement plan depends upon your needs. Key factors to consider include:

Whether you wish to contribute as an employer, employee, or both
The amount you wish to contribute
Whether you have other employees working for you and, if so, if you wish to contribute to their retirement plans as well
Whether you want to make contributions for both you and your spouse
Whether you’d prefer to make tax-deductible contributions or tax-free withdrawals
The level of administrative burden you wish to assume when establishing and maintaining your plan

The chart below will help you to determine which plan may be best for you.

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About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

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