Retirement plans for self-employed people

Are you self-employed? Did you know you have many of the same options to save for retirement on a tax-deferred basis as employees participating in company plans?

Here are some highlights of your retirement plan options.

Simplified employee pension (SEP)

Contribute as much as 25% of your net earnings from self-employment (not including contributions for yourself), up to $69,000 for 2024 ($66,000 for 2023, $61,000 for 2022, $58,000 for 2021, $57,000 for 2020 and $56,000 for 2019).

Establish the plan with a simple one-page form:

Complete
- Form 5305-SEP, Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement PDF , or
- an IRS-approved “prototype SEP plan” offered by many mutual funds, banks and other financial institutions, and by plan administration companies; and

Open a SEP-IRA through a bank or other financial institution.

Set up the SEP plan for a year as late as the due date (including extensions) of your income tax return for that year.

401(k) plan

Make annual salary deferrals up to $23,000 in 2024 ($22,500 in 2023, $20,500 in 2022, $19,500 in 2021 and in 2020; $19,000 in 2019), plus an additional $7,500 in 2023 amd 2024 ($6,500 in 2022, in 2021 and in 2020 and $6,000 in 2015 - 2019) if you're 50 or older either on a pre-tax basis or as designated Roth contributions.
Contribute up to an additional 25% of your net earnings from self-employment for total contributions of $69,000 for 2024 ($66,000 for 2023, $61,000 for 2022; $58,000 for 2021; $57,000 for 2020 and $56,000 for 2019), including salary deferrals.
Tailor your plan to allow access to your account balance through loans and hardship distributions.

A one-participant 401(k) plan is sometimes referred to as a “solo-401(k),” “individual 401(k)” or “uni-401(k).” It is generally the same as other 401(k) plans, but because there are no employees other than your spouse who work for the business, it is exempt from discrimination testing.

Savings Incentive Match Plan for Employees (SIMPLE IRA Plan)

You can put all your net earnings from self-employment in the plan: up to $16,000 in 2024 ($15,500 in 2023; $14,000 in 2022; $13,500 in 2021 and in 2020; $13,000 in 2019), plus an additional $3,500 in 2023 and 2024 if you’re 50 or older ($3,000 if you're 50 or older in 2015 - 2022), plus either a 2% fixed contribution or a 3% matching contribution.

Establish the plan:

Complete
- Form 5305-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) – for Use With a Designated Financial Institution PDF ,
- Form 5304-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) - Not for Use With a Designated Financial Institution PDF , or
- an IRS-approved “prototype SIMPLE IRA plan” offered by many mutual funds, banks and other financial institutions, and by plan administration companies; and
Open a SIMPLE IRA through a bank or another financial institution.
- Set up a SIMPLE IRA plan at any time January 1 through October 1. If you became self-employed after October 1, you can set up a SIMPLE IRA plan for the year as soon as administratively feasible after your business starts.

Learn more

Other defined contribution plans

Profit-sharing plan: allows you to decide how much to contribute on an annual basis, up to 25% of compensation (not including contributions for yourself) or $69,000 in 2024 ($66,000 for 2023, $61,000 for 2022, $58,000 for 2021, $57,000 for 2020 and $56,000 for 2019).
Money purchase plan: requires you to contribute a fixed percentage of your income every year, up to 25% of compensation (not including contributions for yourself), according to a formula stated in the plan.

Defined benefit plans

Traditional pension plan with a stated annual benefit you will receive at retirement, usually based on salary and years of service.
Benefit may also be defined based on a cash balance formula in a hypothetical individual account (a cash balance plan).
Maximum annual benefit can be up to $275.000 ($265,000 for 2023; $245,000 for 2022; $230,000 for 2021 and for 2020; $225,000 for 2019).
Contributions are calculated by an actuary based on the benefit you set and other factors (your age, expected returns on plan investments, etc.); no other annual contribution limit applies.

What's a Keogh plan?

Retirement plans for self-employed people were formerly referred to as “Keogh plans” after the law that first allowed unincorporated businesses to sponsor retirement plans. Since the law no longer distinguishes between corporate and other plan sponsors, the term is seldom used.

Looking for prior year contribution limits?

Dollar figures are subject to annual cost-of-living adjustments. Our chart and PDF file will show you contribution limits for 2021, 2020, 2019, plus earlier years back to 1998.

Types of retirement plans
Retirement plans for small entities and self-employed
IRAs