If you’re self-employed and have no employees, planning for retirement is entirely up to you. The good news? There are several tax-advantaged retirement plans designed specifically for business owners like you. With 2025 contribution limits updated, now is the perfect time to evaluate your options and maximize your savings.
Top Retirement Plan Options for Self-Employed Individuals
- SEP-IRA (Simplified Employee Pension IRA)
- Employer Contribution Only: You can contribute up to 20% of your net self-employment income or 25% of your wages, capped at $70,000 for 2025.
- SEP-IRAs are easy to set up and have minimal administrative requirements.
- Solo 401(k)
- Employee Contribution: Up to $23,500 ($31,000 if 50+).
- Employer Contribution: Up to 20% of net self-employment income or 25% of wages, with a total combined contribution limit of $70,000 ($77,500 if 50+).
- Catch-Up Contributions: $7,500 (ages 50-59 or 64+), $11,250 (ages 60-63).
- Ideal for those who want to maximize contributions and potentially take out a loan from their plan.
- SIMPLE-IRA (Savings Incentive Match Plan for Employees)
- Employee Contribution: Up to $16,500 ($20,000 if 50+).
- Employer Matching: Either 3% of your defined self-employment income or a 2% nonelective contribution (limited to a max income of $350,000).
- Catch-Up Contributions: $3,500 (50-59 or 64+), $5,250 (60-63).
- A good option for self-employed individuals with fluctuating incomes who want a simple, low-cost plan.
- Traditional & Roth IRAs
- Contribution limit: $7,000 ($8,000 if 50+).
- Traditional IRAs offer tax-deferred growth, while Roth IRAs provide tax-free withdrawals in retirement.
- Defined Benefit Plan
- Contributions are actuarially determined based on the goal of providing an annual retirement benefit up to $280,000.
- This plan is best suited for high-income earners who want to save aggressively and reduce taxable income.
Choosing the Right Plan for You
The best retirement plan depends on your income, tax situation, and long-term financial goals.
- If you want high contribution limits, consider a Solo 401(k) or a Defined Benefit Plan.
- If you prefer ease of setup and administration, the SEP-IRA is a solid choice.
- If you want tax-free retirement income, a Roth IRA may be ideal.
- If you anticipate hiring employees in the future, a SIMPLE-IRA can transition easily into a larger company plan.
Plan Ahead for a Secure Retirement
With tax advantages and flexible options, self-employed individuals have excellent retirement planning opportunities in 2025. Whether you’re just starting or looking to maximize savings, selecting the right plan today can help secure your financial future.
