Retirement Plans for Self-Employed Workers and Side Hustlers
April 2, 2026
Many people began exploring additional sources of income during the pandemic as furloughs and layoffs disrupted traditional employment. As a result, side businesses, freelance work, and contract roles became far more common. If you now earn money through a side hustle, run your own business, or work for an employer that does not offer a retirement plan, you still have ways to build retirement savings. As long as you have earned income, several tax-advantaged options may be available.
Individual Retirement Accounts (IRAs)
One of the most familiar retirement tools is the individual retirement account, commonly referred to as an IRA. Anyone with earned income can contribute to an IRA, and in some cases a nonworking spouse may also contribute through a spousal IRA.
There are two primary types: traditional IRAs and Roth IRAs. Both offer potential tax advantages, but they differ in how and when those tax benefits occur. Traditional IRAs may allow for tax-deductible contributions today, while Roth IRAs are funded with after-tax dollars but may provide tax-free withdrawals in retirement if certain conditions are met.
SEP IRA
Self-employed individuals and freelancers often use a Simplified Employee Pension (SEP) IRA to save for retirement.
Who can establish one?
SEP IRAs can be used by businesses of virtually any structure, including sole proprietors, partnerships, and corporations.
How it works
Contributions to a SEP IRA are generally tax-deductible for the business. If the company has employees, each eligible worker must have their own SEP IRA account, and the employer is responsible for making the contributions.
Employees typically cannot contribute directly to SEP contributions themselves, although they may still make traditional IRA contributions within the same account if they choose. These personal contributions count toward the standard IRA annual limits.
Contribution levels for SEP IRAs can vary each year, ranging from 0% to 25% of compensation, subject to IRS rules and adjustments related to self-employment taxes and retirement plan contributions. For 2025, the maximum contribution limit is $70,000. Employers must contribute the same percentage of compensation for every eligible employee.
Because the calculations for eligible compensation can be complicated—especially for self-employed individuals—it’s often wise to consult a tax professional or review IRS guidance.
Who it may benefit
SEP IRAs are commonly used by freelancers, independent contractors, and small business owners because they are relatively simple and inexpensive to establish and maintain.
Important considerations
A SEP IRA can typically be opened and funded up until the business’s federal tax filing deadline, including extensions.
Self-Employed 401(k)
Another retirement option for independent workers is the self-employed 401(k), often called a solo 401(k).
Who qualifies?
This type of plan is designed for business owners who have no employees other than a spouse who also works in the business.
How it works
A self-employed 401(k) allows contributions in two roles: as the employee and as the employer.
As the employee, you can contribute up to 100% of your compensation, up to $23,500 in 2025.
Additional catch-up contributions are available for individuals age 50 and older.
As the employer, you may contribute up to 25% of eligible compensation. Combined contributions from both roles can reach as much as $70,000 in 2025, plus any applicable catch-up contributions.
Tax treatment options
Employee contributions may be made either on a pre-tax basis or as Roth contributions. Roth contributions are made with after-tax dollars but may allow tax-free withdrawals in retirement if rules are satisfied. Employer contributions must remain pre-tax.
This flexibility can allow business owners to diversify their tax exposure depending on their expectations for future tax brackets.
Administrative requirements
Once the plan balance exceeds $250,000, the business owner must file IRS Form 5500-EZ annually.
Plans generally must be established by the employer’s tax filing deadline, including extensions. However, employee salary deferral elections must typically be made by the end of the calendar year in which the contributions apply.
SIMPLE IRA
Small businesses that want a retirement plan with relatively low administrative complexity may consider a Savings Incentive Match Plan for Employees (SIMPLE) IRA.
Who can establish one?
Businesses with 100 or fewer employees are eligible to offer a SIMPLE IRA.
How it works
Like a 401(k), a SIMPLE IRA allows both employer and employee contributions.
Employees may defer a portion of their salary into the plan, while employers must contribute either
● A matching contribution based on employee deferrals, or
● A nonelective contribution made for all eligible employees, regardless of whether they contribute.
Contribution limits and catch-up provisions vary by year and employee eligibility.
Who it may help
This plan is often attractive for small businesses because it allows employees to save through payroll deductions while keeping administrative costs relatively modest.
Important considerations
SIMPLE IRA plans generally must be established by October 1 of the year in which they take effect. Employer contributions can typically be made up until the company’s tax filing deadline.
Health Savings Accounts (HSAs)
While primarily designed for medical expenses, health savings accounts (HSAs) can also play a role in long-term financial planning.
Individuals enrolled in an HSA-eligible high-deductible health plan may contribute to an HSA and receive several tax advantages:
● Contributions may be tax-deductible
● Earnings grow tax-deferred
● Withdrawals used for qualified medical expenses are tax-free
After age 65, HSA funds can be withdrawn for non-medical purposes without the usual penalty, though ordinary income taxes would apply—similar to withdrawals from a traditional IRA.
The Importance of Starting Early
Regardless of which retirement vehicle you choose, time can be one of the most powerful factors in building long-term savings. Beginning contributions earlier allows investments more time to potentially grow through compounding.
Even if your income comes from freelancing, a side business, or self-employment, taking advantage of available retirement accounts can help create a stronger financial foundation for the future.
Sources:
https://www.fidelity.com/viewpoints/retirement/no-401k
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.