Freelancers do not have employer-sponsored 401(k) plans, but that does not mean we cannot save aggressively for retirement. In fact, we have access to some of the most powerful retirement accounts available. The key is choosing the right one for your income and goals.
Disclaimer: This is educational information, not financial advice. Contribution limits change annually and depend on your specific situation. Consult a financial advisor or tax professional.
We have covered Solo 401(k) vs SEP IRA before. This post adds the Roth IRA into the mix and provides a complete comparison so you can make the best choice for your situation.
The Three Retirement Account Options
As a freelancer, you have three common options for tax-advantaged retirement savings. Each has different contribution limits, tax treatments, and eligibility requirements.
| Feature | Solo 401(k) | SEP IRA | Roth IRA |
|---|---|---|---|
| 2026 max contribution | $23,000 + 25% profit share | 25% of net earnings | $7,000 |
| Employer contribution | Up to 25% of compensation | Up to 25% of compensation | Not applicable |
| Total max (under 50) | ~$69,000 | ~$66,000 | $7,000 |
| Tax treatment | Pre-tax or Roth option | Pre-tax only | Roth only |
| Catch-up (50+) | $7,500 extra | None | $1,000 extra |
| Income limit | None | None | Phaseout ~$150k+ |
| Setup complexity | Medium | Low | Very low |
| Can have employees | No | Yes (must include) | No |
When to Choose a Roth IRA
A Roth IRA is the simplest option. You contribute after-tax dollars and the money grows tax-free forever. You can withdraw your contributions at any time without penalty, making it more flexible than other retirement accounts.
A Roth IRA is ideal if your income is under about $150,000 (the phaseout range for 2026). If you are in a lower tax bracket now and expect to be in a higher one later, paying taxes now to get tax-free growth is a smart move. The maximum contribution is only $7,000 per year ($8,000 if 50+), so it is best as one piece of your retirement strategy, not the whole picture.
Marcus, a freelance videographer earning $50,000 per year, should prioritize a Roth IRA. He is in the 12% bracket now and expects to earn more later. Paying 12% today to avoid taxes on decades of growth is a great deal.
When to Choose a SEP IRA
A SEP IRA is the simplest retirement account for high-income freelancers. You can contribute up to 25% of your net earnings from self-employment, up to about $66,000 in 2026. The contribution is tax-deductible and the money grows tax-deferred.
The SEP IRA is appealing because it requires almost no paperwork to set up. You open an account at any brokerage, deposit money, and done. There are no annual filing requirements as long as your balance stays below $250,000.
The downside: contributions are pre-tax only (no Roth option). If you expect to be in a higher tax bracket in retirement, you may prefer the Solo 401(k). Also, SEP IRA contributions for a given year can be made up until the tax filing deadline, including extensions, which is convenient when you are not sure what your final income will be.
When to Choose a Solo 401(k)
The Solo 401(k) (also called an Individual 401(k)) is designed specifically for self-employed people with no employees. It combines high contribution limits with maximum flexibility.
You can contribute up to $23,000 as an employee contribution (pre-tax or Roth), plus up to 25% of your net earnings as an employer profit-sharing contribution. Total contribution limit for 2026 is approximately $69,000. This is the highest limit of any option.
The Solo 401(k) also allows you to choose between pre-tax and Roth contributions for your employee portion. You can even split your contribution between both. It also allows loan provisions, which some other accounts do not. The main drawback is slightly more paperwork and the need to file Form 5500-EZ annually once your balance exceeds $250,000.
Can You Have More Than One?
Yes, and this is a strategy many freelancers use. The most common combination is a Solo 401(k) plus a Roth IRA. You max out the Roth IRA first ($7,000) and then contribute as much as you can to the Solo 401(k). This gives you both the flexibility of Roth savings and the high limits of the Solo 401(k).
Just remember that the total contribution limit across all accounts is capped by your self-employment income. For example, if your net profit is $50,000, you cannot contribute $69,000 to a Solo 401(k) because that exceeds your earnings. The practical limit is roughly your net self-employment income minus half of your self-employment tax.
Quick Decision Guide
- You earn under $150,000: Start with a Roth IRA. Add a Solo 401(k) when you want to save more than $7,000/year.
- You earn over $150,000: Solo 401(k) is likely your best option for maximum tax-advantaged savings.
- You want simplicity: SEP IRA requires the least paperwork and no annual filing until $250,000.
- You want maximum contributions: Solo 401(k) offers the highest limits and the Roth option.
- You are over 50: Solo 401(k) and Roth IRA both offer catch-up contributions. SEP IRA does not.
Frequently Asked Questions
Can I have a SEP IRA and a Roth IRA at the same time? Yes. The Roth IRA has its own contribution limit independent of the SEP IRA. You can contribute to both in the same year.
Where do I open these accounts? Any major brokerage works: Vanguard, Fidelity, Schwab, or specialty providers like Guideline or Human Interest for Solo 401(k)s. For SEP IRAs and Roth IRAs, Vanguard and Fidelity are excellent low-cost options.
What about health insurance? Health insurance premiums can also reduce your taxable income as a freelancer. See our guide on Health Insurance Options for Self-Employed Workers for details on how health costs affect your retirement savings capacity.
Can I convert my SEP IRA to a Solo 401(k)? Yes, you can roll over a SEP IRA into a Solo 401(k) if you want the Roth option or loan provisions. Check with your brokerage for the specific process.
No matter which account you choose, the most important thing is simply to start saving. Consistency beats optimization. A Roth IRA with $7,000 per year invested in a low-cost index fund will grow to over $1 million in 30 years. That is the power of time, not the power of picking the perfect account.
