how to save for retirement without a 401(k)


Oh, hey boss ladies. If you are a freelancer or own your own business, you have a few more options than those working for someone else without a retirement plan, and let me tell you, they are LEGIT.


Luckily for the self-employed, the government decided to throw you a bone (or 3) and set up plans similar to the 401(k). Each has its own pros and cons, so please read through each carefully and decide which is the best fit for you.


Who Qualifies: Individuals who own their own business (even if they have a full-time job!) in a sole proprietorship, partnership, S-Corp, or C-Corp

The Basics: This acts as a traditional IRA where you don’t get taxed until you take money out of the account in retirement. However, note this is different than a regular 401(k) in that only the employer can make contributions to the retirement plan, not the employee.

Why It Rocks: You can contribute much more to this than a regular traditional IRA, which is capped at $5,500 per year. Under a SEP IRA, you can contribute up to 25% of your income or $54,000 (2017 limit), whichever is less. Thus, if you make $50,000, you can contribute $12,500 each year.

Why It Can Suck: If you have employees, you must set plans up for them as well and contribute the same percentage across the board.

Who Should Use It: Those with a handful of employees they would like to offer a retirement benefit to


Who Qualifies: Those who are self-employed or who own a business/partnership with no employees

The Basics: Both the employee and employer can make contributions to this plan, which can act as either a traditional (tax-deferred) or Roth (post-tax) fund. Employees are capped at $18,000 per year (2017 limit) while employers cannot contribute more than 25% of their earned income.

Why It Rocks: It has the same maximum annual contribution limit as the SEP IRA of $54,000 (2017 limit), but you have a higher likelihood of achieving it because both the employee and employer can contribute. If you’re over 50, you also have the ability to make catch-up contributions (something not offered with the SEP) of an additional $6,000 per year.

Why It Can Suck: Paperwork. If the retirement plan assets get over $250,000, then you have to file an extra tax form with the IRS (Form 5500).

Who Should Use It: Those with no employees or who are older than 50


Who Qualifies: Those who are self-employed or have small businesses with fewer than 100 employees

The Basics: Just like a self-employed 401(k), both the employee and employer can contribute money to the plan, which can act as a traditional (tax-deferred) or Roth (post-tax) fund. Employer portions are limited to a 3% matching contribution or a 2% non-elective contribution (meaning they give it to everyone, regardless of whether they choose to participate or how much they put in).

Why It Rocks: For small businesses with less than 100 employees, it’s a great alternative to putting a 401(k) in place

Why It Can Suck: Employee contributions are limited to $12,500 per year, which is significantly less than the maximum you can contribute under the SEP IRA or Self-Employed 401(k).

Who Should Use It: Those with small businesses that have between 10 & 100 employees


Alright, you’ve got your company plan in place. Now what?

Well, take a good luck at your business and see how much you want to contribute through one of the three previously-mentioned options. Because any contributions you make on behalf of the company are tax-deductible, you may want to funnel quite a bit through one of these self-employed plans. If you’re in the 25% tax bracket, a $10,000 employer contribution will save you $2,500. Not too shabby, right?

When you reach the contribution limit of what your business can support or the threshold the law dictates, your next move is to contribute up to the max in your Roth IRA.

Because this is entirely separate from what you do within the company, what you contribute to your business-sponsored plan has no effect on the amount you can put in your Roth IRA. Thus, you have the opportunity to invest an additional $5,500 (2017 limit) in the market. Um, yes please.


I’m a writer, new mom and foodie. I love sharing what I know while making others feel beautiful. On this blog, I share my healthy lifestyle, simple meals, fitness tips and experiences.

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Kara Bout It