Without an employer plan, a self-employed person chooses their own retirement account. The choice turns on three things: how much you want to contribute, whether you have employees, and how much paperwork you are willing to take on.
One Massachusetts point up front: contributions to SEP, SIMPLE, Keogh and IRA accounts reduce your federal taxable income but are not deductible on the Massachusetts return. The federal benefit is real; just do not count on the same at the state level.
How we ordered them
- Contribution room. How much a self-employed owner can put in for 2026.
- Fit. Whether the account suits a business with no employees, or with some.
- Primary sources. Limits are from IRS Notice 2025-67 and IRS plan pages.
The five accounts
1.Solo 401(k)
Best for: Owners with no employees other than a spouse who want the most room
You contribute twice: as the employee, up to $24,500 of elective deferrals in 2026, and as the employer, a percentage of your self-employment earnings. Total contributions are capped at $72,000, plus catch-up contributions. Many plans offer a Roth option for deferrals.
Once plan assets reach $250,000 at year end, you file an annual Form 5500-EZ.
- 2026 elective deferral: $24,500. Catch-up age 50+: $8,000; ages 60–63: $11,250.
- 2026 total limit: $72,000, excluding catch-ups.
- A sole proprietor with no employees can adopt a new 401(k) after year end and still make first-year deferrals if it is adopted by the return due date, without extensions.
2.SEP-IRA
Best for: Owners who want simplicity and flexible, employer-only contributions
Employer contributions only, up to 25% of compensation — which for a self-employed owner works out to about 20% of net self-employment earnings after the self-employment tax adjustment — capped at $72,000 for 2026. No annual filing, and contributions can vary year to year.
If you have eligible employees, you must contribute the same percentage for them.
- Can be set up as late as the business return's due date, including extensions.
- 2026 compensation cap: $360,000.
3.SIMPLE IRA
Best for: Small businesses with a few employees who want a low-cost plan
Employees, including the owner, defer salary; the employer makes a matching or fixed contribution. Lower limits than a 401(k), but far less administration.
- 2026 deferral: $17,000 ($18,100 for certain plans). Catch-up age 50+: $4,000; ages 60–63: $5,250.
4.Traditional IRA
Best for: Anyone with earned income, alongside or instead of a business plan
Up to $7,500 for 2026, plus a $1,100 catch-up at 50 or older. Deductibility can be limited if you are also covered by a workplace plan — including your own SEP or solo 401(k).
Visit Traditional IRA’s website →5.Roth IRA
Best for: Owners who expect a higher tax rate later
The same $7,500 limit shared with traditional IRAs, contributed after tax, with qualified withdrawals tax-free. Eligibility phases out in 2026 between $153,000 and $168,000 of income for single filers, and $242,000 to $252,000 for joint filers.
Visit Roth IRA’s website →
2026 limits at a glance
| Account | Main limit | Catch-up (50+) | Set up by |
|---|---|---|---|
| Solo 401(k) | $24,500 deferral; $72,000 total | $8,000 ($11,250 at 60–63) | Return due date (see note) |
| SEP-IRA | ~20% of net SE earnings; $72,000 cap | None | Return due date incl. extensions |
| SIMPLE IRA | $17,000 deferral | $4,000 ($5,250 at 60–63) | Generally by October 1 for the year |
| Traditional / Roth IRA | $7,500 combined | $1,100 | Contribute by the April filing deadline |
Employer contributions to a new solo 401(k) can be made if the plan is set up by the due date including extensions; first-year employee deferrals need adoption by the due date without extensions. SIMPLE IRA setup timing has exceptions for new businesses — confirm before relying on it.
A 2026 change for higher earners
Starting in 2026, if a 401(k) participant's prior-year wages from the plan sponsor exceeded $150,000, catch-up contributions must be made as Roth contributions. The rule looks at W-2 wages, and it does not apply to SEP or SIMPLE IRAs. S corporation owners paying themselves a salary should check where they fall.
General information, not advice for your specific situation. Tax rules, prices and product features change, and firms change what they offer — check with the provider before relying on anything here, and talk to us or another qualified professional before acting on it.
