✍️ FinZelo Editorial Team 📅 September 2026 ⏱️ 6 min read
📌 Key Takeaway: Self-employed workers have access to retirement plans with much higher contribution limits than a standard IRA — a Solo 401(k) or SEP-IRA can shelter tens of thousands of dollars a year from current income tax.

SEP-IRA

Contributions are limited to a percentage of net self-employment income, up to an annually adjusted dollar cap — simple to set up and administer, making it popular for solo freelancers and small business owners with no or few employees.

Solo 401(k)

Allows contributions in two capacities — as 'employee' and as 'employer' — often letting solo business owners contribute more than a SEP-IRA at the same income level, plus the option of Roth contributions some SEP-IRAs don't offer.

SIMPLE IRA

Designed for small businesses with employees, with lower contribution limits than a Solo 401(k) but simpler administration if you have staff to include in the plan.

Why This Matters at Tax Time

Contributions to any of these plans reduce your taxable self-employment income, directly lowering your income tax bill (though not your self-employment tax, which is based on net earnings before the retirement deduction).

This page is for educational purposes and isn't personalized financial or tax advice. Figures, rates, and program details change frequently — confirm current terms directly with lenders, tax professionals, or the IRS before acting.