Retirement Planning for the Self-Employed: The Rules to Know

If you work for yourself, no employer sets up a 401(k) or matches your savings. You choose a plan, pick the contribution, and handle the paperwork. This guide explains which plans the IRS lists for self-employed people, the 2026 limits it publishes, and how your own contribution is figured. It is general education, not tax or personal advice. A tax professional can apply these rules to your numbers.

What retirement plan options do self-employed people have?

The IRS says self-employed people can use many of the same tax-deferred options employers offer (IRS: retirement plans for self-employed people). Its list includes a SEP, a 401(k), a SIMPLE IRA, a profit-sharing plan, a money purchase plan and a defined benefit plan. The IRS adds that "Keogh plans," the older name for these plans, are rarely used now.

How is your own contribution figured?

This is the part that surprises many people. The IRS says you "can't simply multiply your net profit on Schedule C" by the plan percentage (IRS calculation page). Your plan compensation is your net earnings from self-employment, reduced by the deductible half of your self-employment tax and by your own plan contribution.

Because the contribution and the compensation depend on each other, the IRS suggests a reduced rate. With a 10% plan rate, the reduced rate is 10% divided by 110%, or 9.0909%. The IRS shows a 2019 example of $100,000 net profit and $14,130 of self-employment tax:

This is an old example. Use the current worksheets in IRS Publication 560 for your own year. The IRS also says contributions for yourself are deducted on Form 1040, Schedule 1, not on Schedule C.

What is self-employment tax?

Self-employment tax is how you pay Social Security and Medicare on your own earnings. The IRS gives a rate of 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. For 2026, the Social Security part applies to the first $184,500 of combined wages, tips and net earnings (IRS self-employment tax page). You file Schedule SE if your net earnings were $400 or more. You can deduct the employer-equivalent portion when figuring adjusted gross income; the IRS calculation page uses half of the tax in its examples.

What are the 2026 limits for each plan?

The IRS one-participant page says catch-up contributions do not count toward the overall limit. It also says the deferral limit is per person: if you also defer in another employer's 401(k), all your deferrals count together. The IRS says a SEP lets an employer contribute up to 25% of each employee's pay, and it gives $800 as the 2026 SEP minimum compensation on its COLA page.

What are the differences between a SEP and a solo 401(k)?

A SEP takes employer contributions only. Employees cannot contribute, and the IRS says contributions are not required every year. It also says employees are always 100% vested in SEP contributions, an employer need not file Form 5500 for a SEP, and Roth treatment is optional for the employer (IRS SEP page).

A one-participant 401(k) covers an owner with no employees, or the owner and a spouse. The IRS says the owner can defer up to 100% of compensation, up to the annual limit, and the plan can also take an employer contribution generally up to 25% of plan compensation (IRS one-participant 401(k) page). The IRS adds that the plan generally must file Form 5500-EZ if it has $250,000 or more in assets at year-end, and that owners without common-law employees generally do not need nondiscrimination testing. Plans with employees who become eligible can face testing.

When are the deadlines?

Publication 560 for 2025 says a SEP can be set up and funded as late as the due date of the return, including extensions. For a solo 401(k), it says a sole proprietor with no employees can adopt the plan after year-end, if adopted by the filing deadline without extensions, and that owner deferrals must be elected by year-end. These deadlines can change, so check the current Publication 560 and your plan provider. The IRS retirement plans page for self-employed people says a SIMPLE IRA can be set up from January 1 through October 1.

How does self-employment affect Social Security?

The Social Security Administration (SSA) says it figures benefits from all covered earnings, so reporting your earnings matters. You report them on your tax return with Schedule SE. For 2026, SSA says each work credit takes $1,890 in net earnings, and four credits take $7,560 (SSA: If You Are Self-Employed). SSA says benefits generally require up to 40 credits (10 years of work). For how timing changes your benefit, see our guide to choosing a retirement date.

Common mistakes self-employed savers make

• Multiplying Schedule C profit by the plan rate. The IRS says you cannot simply do this.
• Deducting the contribution on Schedule C. The IRS says to deduct it on Schedule 1, and to amend your return if you did otherwise.
• Forgetting the per-person deferral limit. Deferrals in a day job plan and a solo plan add together.
• Missing a filing. The IRS says a one-participant plan with $250,000 or more in assets generally files Form 5500-EZ.
• Hiring staff without checking the plan. Eligible employees can change a plan's rules and testing.

Questions to take to a professional

• Which plan fits my income pattern, and what is my contribution after self-employment tax?
• What are the exact deadlines to adopt the plan and fund it this year?
• Would a Roth or a traditional contribution suit my tax situation?
• If I hire someone, how does that change my plan?

For related ground, see our guides on starting late, how much you need to retire, estimating retirement expenses, ages 60 to 63 catch-up rules and the retirement planning overview.

Where gold and silver IRAs fit - and where they do not

Some self-employed savers hold part of a retirement account in gold or silver. The arguments people make include diversification, a long record as a store of value, and the appeal of a tangible asset. These are arguments, not guarantees, and this page makes no price forecast.

The costs and rules matter equally. A self-employed person who uses an IRA for metals pays custodian, storage and dealer charges, and prices can fall. The IRS says an individually directed account that acquires a collectible is treated as taking a distribution equal to its cost. It lists exceptions for certain gold, silver and platinum coins, state-issued coins and for bullion of a qualifying fineness, but only if a bank or approved non-bank trustee keeps physical possession (IRS collectibles page). Whether a given SEP or solo 401(k) allows metals depends on its plan document and provider, which we did not review. Our gold IRA guide, fee guide, risk guide and contribution limits guide explain the basics. This site does not say whether metals suit any one person.

What we did not check

We did not review the Publication 560 rate tables and worksheets in full, the part of Publication 560 beyond its first 100,000 characters, income limits for deductible or Roth IRA contributions, the Roth treatment of SEP or SIMPLE contributions, state rules, or whether a SIMPLE IRA may be used by a sole proprietor with no employees (the IRS lists it for the self-employed but its SIMPLE limits page does not address this). Rules change each year, so confirm with the IRS and a qualified professional.