In 2025, freelancing is no longer just a side hustle. Skilled knowledge workers now make up a large share of the independent workforce, contributing an estimated $1.5 trillion to the U.S. economy in 2024. Recent data shows that about 28% of skilled knowledge workers freelance, a shift that is expected to keep climbing over the next few years.

Younger generations are driving much of this momentum. More than half of Gen Z knowledge workers already freelance, compared with significantly lower participation among older age groups. The appeal is clear: greater control over schedules, diversified income streams, and the ability to build a personal brand through digital platforms.

For freelancers, independence also extends to financial planning. Without access to an employer-sponsored 401k, the responsibility of building retirement savings rests entirely on the individual.

The good news is there are retirement plans designed specifically for self-employed workers. These options can offer competitive contribution limits and flexibility, sometimes even beyond what traditional employer plans allow.

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The Best Retirement Plan Options for Freelancers

Many freelancers don’t realize there are retirement accounts created specifically for business owners and self-employed workers. These plans can offer higher contribution limits and more flexibility than traditional accounts. The two main options to know are:

  • Solo 401k
  • SEP IRA

Before diving into traditional or Roth IRAs, let’s look more closely at the Solo 401k and SEP IRA to see how they compare.

Solo 401k

A Solo 401k is essentially a 401k designed for self-employed individuals. Unlike a corporate 401k, you don’t need an employer to sponsor the plan — you set it up yourself.

📌 Also read: The Best Solo 401k Plans Compared

Eligibility rules:

  • Must have some form of business activity.
  • Cannot have employees covered by the plan (except a spouse).
  • If you hire employees who meet eligibility rules, the plan no longer qualifies as “solo.”

Contribution limits for 2025

  • Up to $23,500 in employee deferrals ($31,000 if age 50+ with catch-up).
  • Plus employer contributions, bringing total annual additions up to $70,000 (or $77,500 if 50+).

Key features of a Solo 401k

  • Direct account control (also called “checkbook control”) may be available with some providers, letting you choose from a wide range of investments, including stocks, funds, and real estate (subject to IRS rules).
  • Roth contributions are available if the plan offers them. You can make Roth deferrals up to the employee limit, with qualified withdrawals being tax-free if requirements are met.
  • Some plans allow after-tax contributions and in-plan Roth conversions (“mega backdoor” strategy), subject to the overall annual additions limit.
  • Loan option: borrow up to 50% of your balance, up to $50,000, and repay within five years.

📝 Note: A Solo 401k can be an attractive choice for  higher-earning freelancers who want maximum flexibility in contributions and investment options.

📌 Also read: Can I Have Both a Solo 401k and a Regular 401k?

SEP IRA

A SEP IRA shares similarities with a Solo 401k but has different rules that matter if you employ other people.

Contribution rules for 2025

  • Employer contributions only, up to the lesser of 25% of compensation or $70,000.
  • No catch-up contributions for age 50+.

Key features of a SEP IRA

  • You can have employees, but contributions must be made at the same percentage for all eligible workers. For example, if you contribute 8% for yourself, you must also contribute 8% of each eligible employee’s pay.
  • Contributions are tax deductible and made with pre-tax dollars.
  • Investment choices can be broad if the provider allows self-directed options, but review the provider’s menus and self-directed policies carefully.
  • No Roth deferral option unless the SEP is specifically set up to allow Roth employer contributions.
  • No loan feature, unlike the Solo 401k.

📝 Note: A SEP IRA may suit freelancers with employees, but required equal-percentage contributions can become costly as your team grows.

Roth IRA and Traditional IRA

A Solo 401k or SEP IRA is designed specifically for freelancers and business owners with self-employment income. Roth IRAs and Traditional IRAs, by contrast, are open to most people with earned income, whether from a full-time job, side gig, or business.

Contribution limits are lower than with a Solo 401k or SEP IRA, but many freelancers use IRAs in combination with other plans. This layering strategy can help diversify tax treatment and keep future withdrawal options flexible.

How They Differ

Although they are closely related, the key difference between a Traditional IRA and a Roth IRA comes down to when you pay taxes:

  • Traditional IRA – Contributions are generally made with pre-tax dollars, often reducing taxable income today. Withdrawals in retirement are then taxed as ordinary income. Deductibility can phase out at higher income levels, especially if you or your spouse are covered by a workplace plan.
  • Roth IRA – Contributions are made with after-tax income. There’s no upfront tax deduction, but qualified withdrawals in retirement are tax-free if you meet the age and holding period rules.

📝 Note: The Roth IRA works similarly to a Roth Solo 401k, which also uses after-tax contributions with tax-free withdrawals if qualified.

Contribution Limits

For 2025, the combined contribution limit across all IRAs is $7,000, or $8,000 if you’re age 50 or older. You cannot contribute the full amount to both a Roth IRA and a Traditional IRA in the same year—the limit applies in total across both accounts.

Investment Choices

Both Roth and Traditional IRAs can be opened at most banks, brokerages, or investment platforms. Standard accounts usually offer access to mutual funds, ETFs, and other market investments.

If you want broader options, a self-directed IRA allows investing in alternative assets such as real estate, private equity, or certain other ventures. These accounts come with stricter IRS rules, higher administrative costs, and careful monitoring to avoid prohibited transactions.

📝 Note: Self-directed IRAs expand flexibility but often require more diligence and professional guidance to avoid costly mistakes.

Should Freelancers Open a Business Retirement Plan?

Freelancers often benefit from opening a business retirement plan, especially if they want more control over how and when to save. A Solo 401k is one of the most flexible options available, letting you adjust contribution amounts and choose between pre-tax or Roth contributions depending on your tax strategy.

Unlike an employer-sponsored plan, you decide how much to set aside each year. Contributions are optional, so you can scale back in slower years or save more during profitable ones. 

Many Solo 401ks also allow a wider range of investments compared with traditional workplace 401ks, and some providers offer direct account control (sometimes called “checkbook control”) for even greater flexibility.

📝 Note: For freelancers with no employees, a Solo 401k can be an efficient way to save for retirement while keeping plan maintenance relatively simple.

📌 Also read: Solo 401k Vs SEP IRA

Can You Contribute to Multiple Retirement Plans at Once?

Yes. Freelancers can generally contribute to more than one type of retirement plan in the same tax year. For example, you might contribute to a Traditional or Roth IRA while also funding a Solo 401k or SEP IRA.

There are some technical considerations:

  • A SEP IRA created using the IRS Form 5305-SEP does not allow you to maintain another qualified plan. If you want to use both a SEP and a 401k, you’ll need a prototype or individually designed SEP instead.
  • Contribution limits apply separately by plan type, but your total contributions across accounts must still follow IRS rules.

Choosing between a Solo 401k and SEP IRA usually depends on your business structure. Freelancers with no employees often find a Solo 401k more flexible. If you have employees who must be covered, a SEP IRA may be the practical alternative.

📝 Note: Contribution strategies can get complex when you use multiple accounts. It’s a good idea to review your situation with a tax professional or financial advisor before deciding how to allocate savings.

Wrapping Up

Freelancers have several retirement savings options available, including Solo 401ks, SEP IRAs, and Traditional or Roth IRAs. Each plan has its own set of rules and benefits, so the best choice depends on income level, tax approach, and whether employees are part of the business.

Freelancers who explore these options early may find it easier to balance current tax advantages with future retirement income planning.

📌 Want to learn more? Download the Solo 401k Handbook below:

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The Solo 401k Handbook

Everything you need to know in a handy ebook format.


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