I still remember the exact moment it hit me.
I’d just finished paying myself from my best freelance month ever – six figures in a single quarter – and instead of pure celebration, I felt a tiny knot in my stomach. Because after taxes, health insurance, and software subscriptions, almost nothing was going toward the future version of me. My friends with “real jobs” were getting free money through employer matches while I was basically hoping Social Security would still exist in thirty years.
Sound familiar? If you’re self-employed, a freelancer, or run your own small business, you’ve probably had that same quiet panic. The great news – the part that honestly changed everything for me – is that you can actually build a richer retirement than most corporate employees, once you know the two accounts that were literally designed for people like us.
The Two Retirement Superpowers for the Self-Employed
Forget everything you think you know about retirement being harder when you don’t have an HR department. The truth is the IRS has handed independent workers some of the most generous tax-advantaged accounts available – sometimes even better than traditional 401(k)s.
After helping dozens of freelancers and small business owners set these up (and doing it myself), I can tell you there are really only two options worth your time in 2025: the SEP IRA and the Solo 401(k). Everything else is noise.
Option 1: The SEP IRA – Set-It-and-Forget-It Powerhouse
Let’s start with the one that feels almost too easy, because honestly, it kind of is.
A Simplified Employee Pension (SEP) IRA is the retirement account for people who want maximum savings with minimum paperwork. I’ve seen business owners open one in under 15 minutes and start contributing the same day.
Here’s what makes it ridiculously good:
- You can contribute up to 25% of your net self-employment income – or a hard cap of $70,000 in 2025 ($72,000 in 2026)
- Contributions are 100% tax-deductible the year you make them
- Growth is tax-deferred until withdrawal
- You can change your contribution every year – perfect for lumpy freelance income
- If you have employees, you must contribute the same percentage for them (fair, but something to plan for)
Think of the SEP as the “I just want this handled” option. One financial planner I know calls it the minivan of retirement accounts – not the flashiest, but it gets the whole family where they need to go safely and on time.
“The SEP is the closest thing to a no-brainer in personal finance. You fill out one IRS form and you’re done. Most of my clients contribute six figures over time with almost zero ongoing work.”
The math can be stunning. A freelancer earning $150,000 net (after expenses) could sock away $37,500 this year alone – completely tax-deductible – and watch it compound for decades.
And here’s the part most people miss: you can open a SEP IRA all the way until your tax filing deadline (including extensions). Made a killing in December? No problem. Fund it in April and still get the deduction for the previous year.
Option 2: The Solo 401(k) – The Heavy Hitter
If the SEP IRA is the reliable minivan, the Solo 401(k) is the sports car with a rocket booster attached.
Also called a one-participant 401(k) or individual 401(k), this account lets you wear two hats: employee and employer. That means you get to double-dip.
- As the employee, you can defer up to $23,500 in 2025 ($24,500 in 2026) + catch-up if you’re 50+
- As the employer, you can add up to 25% of your compensation
- Total limit: still $70,000 (or $77,500 with catch-up) – same as SEP
- Roth option available (tax-free growth!)
- Ability to take loans against the balance (up to $50,000)
Let that sink in. Someone earning $120,000 net could contribute roughly $20,000 as the employee + $25,000-$30,000 as the employer match. That’s $50,000+ in one year, often beating what even high-earning corporate workers save.
In my experience, the Solo 401(k) shines brightest for people in their 30s and 40s who have inconsistent income but big earning years. You max out the employee contribution in good months, then pile on the employer portion when cash flow allows.
SEP IRA vs Solo 401(k): Real Numbers Side-by-Side
| Feature | SEP IRA | Solo 401(k) |
| 2025 Contribution Limit | $70,000 | $70,000 (+$7,500 catch-up) |
| Employee Contribution | No | Up to $23,500 |
| Employer Contribution | Up to 25% | Up to 25% |
| Roth Option | No | Yes |
| Setup Complexity | Very easy | Easy-moderate |
| Loans Allowed | No | Yes |
| Deadline | Tax filing deadline | End of year (employee portion) |
Still unsure? Here’s my personal rule of thumb: if you earn less than about $100k net and hate paperwork, start with a SEP. If you earn more, want the Roth option, or just love the idea of contributing as both employee and employer, go Solo 401(k).
The Biggest Mistake Self-Employed People Make
Waiting for the “perfect” time.
I’ve watched talented designers, consultants, and developers earn millions over a decade and still have less than $100k saved because they kept telling themselves, “I’ll start next quarter when things slow down.” Spoiler: things never slow down.
The magic isn’t in finding some secret hack – it’s in starting. Even $500 a month compounds into life-changing money over twenty years.
“The best time to start saving for retirement was ten years ago. The second best time is right now.”
– Every financial planner ever (but it’s still true)
Here’s the truth I wish someone had shaken me by the shoulders and told me earlier: being self-employed doesn’t mean you get fewer retirement options. In many ways, you get better ones. You just have to take the first step.
So pick one. Open the account this week. Automate contributions. And then get back to building the business – and the life – you actually want.
Your future self? They’re already thanking you.
