SEP-IRA vs Solo 401(k): The Complete Freelancer Retirement Guide

Why Retirement Planning Is Harder for Freelancers

No employer match. No automatic enrollment. No pension. As a freelancer, you’re entirely responsible for your retirement — but you also have access to retirement accounts with much higher contribution limits than regular employees.

In 2025, a freelancer can shelter up to $70,000 from taxes in a single year. A salaried employee maxes out at $23,000 in a 401(k). That gap is significant.

The Two Main Options

SEP-IRA (Simplified Employee Pension)

2025 contribution limit: Up to 25% of net self-employment income, max $70,000

How it works: You contribute pre-tax dollars, investments grow tax-deferred, you pay income tax on withdrawals in retirement.

Best for: Simplicity. You can open one at any major brokerage (Vanguard, Fidelity, Schwab) in 15 minutes. No annual filing with the IRS.

Contribution deadline: Your tax filing deadline, including extensions (so October 15 if you extend).

Solo 401(k) (Individual 401k)

2025 contribution limit: $23,500 as “employee” + up to 25% of net income as “employer” = up to $70,000 total

Key advantage: You can contribute the full $23,500 even if your income is relatively low. At $50,000 net income, a SEP-IRA lets you contribute $12,500; a Solo 401(k) lets you contribute $23,500+.

Best for: Higher contribution amounts at moderate income levels. Also allows Roth contributions at some brokerages.

Catch: You must open it before December 31 of the tax year. Annual IRS filing (Form 5500-EZ) required once plan assets exceed $250,000.

Side-by-Side at Different Income Levels

Net Income	SEP-IRA Max	Solo 401(k) Max
$30,000	$7,500	$23,500
$50,000	$12,500	$24,938
$100,000	$25,000	$30,500
$200,000+	$70,000	$70,000

Key insight: Solo 401(k) wins at lower incomes. They converge at higher incomes.

How to Open Each

SEP-IRA: Open at Vanguard, Fidelity, or Schwab. Takes 15 minutes online. Contribute by tax deadline.

Solo 401(k): Open at Fidelity (no fees, good fund selection) or Vanguard. Must be opened by December 31. Contribute up to tax deadline.

The Tax Math

At a 24% marginal tax rate, contributing $20,000 saves $4,800 in federal taxes. At a 32% rate, that’s $6,400 saved.

The money also grows tax-deferred — no annual taxes on dividends or capital gains until withdrawal.

Our Recommendation

• Income under $100,000: Solo 401(k) almost always wins
• Income over $200,000: Either works (both max at $70,000)
• Value simplicity: SEP-IRA
• Want Roth option: Solo 401(k) at Fidelity

Start now. The tax savings are real, and the compound growth over 20-30 years is transformative.