Are you self employed and thinking about retirement? Without retirement plan options from an employer, it’s up to you to determine whether to consider retirement benefits. There are many good retirement plan choices for the self-employed. In fact, you have many of the same retirement choices as employees who take part in company retirement plans. Establishing a retirement plan can provide important tax advantages. It can also help you keep your best employees and maintain a highly productive workforce. We’ve listed the six best retirement plan choices for the self-employed individuals and the highlights of each.

Self-Employment Plan Options:

  • SEP (Simplified Employee Pension)
  • Savings Incentive Match Plan for Employees (Simple IRA Plan)
  • 401(k) plan
  • Solo 401(k) plan
  • Payroll-deduction IRA
  • Self-employed 401(k) profit-sharing plan

Simplified Employee Pension

A Simplified Employee Pension IRA permits employers to contribute to their employee’s traditional IRAs. This plan allows employers to put aside funds in retirement accounts. SEP requires you to put away up to 25 percent of your self-employment proceeds, exclusive of personal retirement contributions. The plan can be created with IRS Form 5305-SEP. You will need to open a SEP through a bank or other financial institution. Establish a SEP for a year at a time. You can deduct the contributions from your taxes. Other than contributions, setting up an SEP should involve no additional costs.


  • Create the plan with IRS Form 530 SEP
  • Open a SEP through a bank or other financial institution
  • Set up the plan for a year at a time

Savings Incentive Match Plan for Employees

Typically, the employer makes matching contributions to each eligible employee’s account up to a certain percentage of compensation. Set up a SIMPLE IRA plan January 1 through October 1. To establish a Savings Incentive Match Plan Complete IRS form 5305 and open a SIMPLE IRA through a bank or other financial institution.


  • Complete RS form 5305
  • Open a SIMPLE IRA through a bank or another financial institution
  • Set up a SIMPLE IRA plan January 1 through October 1

401(k) Plan

This is a tax-deferred savings plan for employees. With a 401(k) plan, you can make salary deferrals up to $18,000. You can contribute up to an additional 25% of your self-employment earnings for total contributions of up to $53,000, including salary deferrals. You can customize the plan to allow access to your account balance through structured loans and emergency allotments.


  • Tax-deferred savings plan for employees
  • Up to $18,000 salary deferrals
  • Savings accumulate over time

Solo 401(k) Plan

Solo 401(k) plan is a one person plan for small business owners or those who are independently employed. You can contribute another 25 percent of compensation, up to a ceiling of $49,000 including your employee contribution. If you’re 50 or older, you can toss in another $5,500 extra.


  • Good for small business owners
  • Single-person plans
  • People over 50 can contribute an extra $5,500

Payroll-deduction IRA

If you don’t want take on setting up a formal retirement plan, you can still open and contribute to an IRA. You can also allow your employees to do the same through payroll deductions. As the employer, you can decide to make the IRA contributions for some of your employees, and increase the gross pay by the amount you want them to earn. The Payroll-deduction IRA is an easy, inexpensive method of helping employees save. The yearly limit for this plan is $5,500 and $6,500 for employees age 50 or older. You can set up this informal plan as late as the due date of your income tax return.


  • Covers employees through payroll deductions
  • Increase gross pay
  • Set up on or before the due date of your income tax return

Self-employed 401(k) Profit-sharing Plan

This plan allows the self-employed to make generous contributions both as an employer and as an employee. There are two possible kinds of contributions: percentage of net profit a fixed-dollar amount up to the employee 401(k) contribution limit of $18,000 and $24,000 for those over age 50. You will need to create the SE 401(k) plan before year-end if you want to make a deductible contribution for the year.


  • Self-employed can make generous contributions
  • Good for sole proprietors with no employees
  • Must establish before the end of year


Remember, you have many retirement plan options, even if you are self-employed. Establishing a retirement plan will provide important tax advantages and help you maintain a productive workforce. The six best retirement plans for the self employed are SEP (Simplified Employee Pension, Savings Incentive Match Plan for Employees (Simple IRA Plan), 401(k) plan, Solo 401(k) plan, Payroll-deduction IRAs, and the self-employed 401(k) profit-sharing plan.