Instagram logoYouTube logoTikTok logoLinkedIn logoX social logoFacebook logo

Pros and Cons of Self-Employed Retirement

Jatniel Brito
5 minute read

Here’s a look at the pros and cons of retirement saving when you’re self-employed, plus why something like a SEP IRA may fit into your savings strategy.

The Self-Employed Retirement Advantage Most People Miss

Self-employment means you're the CEO, the intern, and everything in between, including HR. The catch is that you don’t have a ready-made retirement plan from an employer. And that might actually be an advantage.  

While your traditionally employed friends are stuck with whatever 401(k) their company picked, you have something they don't: complete control over potentially much higher savings limits.

Here's the plot twist: while your corporate friends complain about being "stuck" with their employer's 401(k), you have access to contribution limits that would make them jealous.

With a SEP IRA, you can contribute up to $70,000 annually in 2025. Let that sink in:

  • 10x more than a regular IRA (which has a $7,000 limit if you’re under 50)
  • 3x more than most employee 401(k) contributions (which have $25,000 limits if you’re under 50)
  • That’s more than even high earners can contribute to their employer plans

This isn't just about saving more money. It's about potentially building wealth at a pace that traditional employees simply cannot match, even with an employer match.

The Pros of Retirement Savings for the Self-Employed

1. You’re in total control

You’re not tied to the investment options an employer chooses. You decide where to open your account, how much to contribute, and how to invest, giving you the flexibility to shape your retirement plan your way.

2. You can design a plan that fits your business income

When income fluctuates, so can your contributions. You have the option to contribute more in strong years and scale back when business slows down, without being locked into a fixed schedule.

3. Higher contribution opportunities

Self-employed retirement accounts like SEP IRAs, Solo 401(k)s, and SIMPLE IRAs often allow you to contribute more than the standard Traditional or Roth IRA limit. In high-earning years, this gives you the chance to set aside more for retirement than other employees can through workplace plans.

4. Business tax perks

Contributions to many self-employed retirement accounts can be deducted as a business expense, reducing your taxable income today. 

Of course, this freedom comes with trade-offs. Here's the complete picture:

The Cons of Retirement Savings for the Self-Employed

1. There’s no built-in plan

Without an employer, there’s no HR department automatically setting up or managing your retirement benefits. You’re the one responsible for opening the account, making contributions, and keeping everything on track.

2. No employer match

Company-sponsored retirement plans often come with a match, meaning extra money added to your account by your employer. When you’re self-employed, that match disappears, and contributions solely come from you. If you have employees, some plans, like a SEP IRA, require you to contribute for them too, but if it’s just you, you only contribute for yourself.

3. Variable income makes consistency harder

Running your own business often means dealing with unpredictable cash flow. While flexibility is a perk, it can also be tempting to skip contributions in slower months, which can slow your long-term progress.

4. Employee obligations add complexity

If you hire staff, some retirement accounts for the self-employed require you to contribute for them at the same rate as you do for yourself. That means your retirement plan can also become part of your employee compensation strategy.

Let’s Make Retirement Simple Together.

Got old 401(k)s? Rolling them into a PensionBee IRA takes only a few minutes and helps organize your retirement savings.

Learn More

Be Retirement Confident.

Roll over all your old 401(k)s into a PensionBee Individual Retirement Account (IRA). It takes just a few minutes to sign up.

Get started

Why Choose a SEP IRA 

A SEP IRA (Simplified Employee Pension Individual Retirement Account) is one of the most straightforward retirement accounts built with the self-employed in mind. It’s designed for freelancers, contractors, and small business owners, especially those who operate as sole proprietors, meaning they run their business on their own and report income and expenses on their personal tax return without forming a separate legal entity.

Here’s why it’s ideal:

1. Generous contribution limits

With a SEP IRA, you can contribute up to 25% of your compensation, or about 20% of net self-employment income after adjustments, with a cap of $70,000 in 2025. This makes it possible to save far more than you could with a Traditional or Roth IRA.

2. Easy to set up

SEP IRAs require far less paperwork than other types of retirement plans. Opening one is often as simple as filling out an online application, making it accessible even if you’re running your business on your own.

3. Flexible contributions

You’re not required to contribute every year. That flexibility allows you to save more during strong income years and hold back when cash flow is tighter, without penalty.

4. Adaptable for solo workers and small teams

SEP IRAs work whether you have no employees or a few. You can adjust contributions depending on business size and income, making it easier to manage retirement savings even when cash flow fluctuates.

Example: Sarah, a freelance consultant, earned $200k in 2024. In a corporate job, she'd be limited to $23,500 in 401(k) contributions. With a SEP IRA, she could contribute up to $70,000 for the year. That’s about $46,500 more than a standard 401(k), giving her a huge boost in retirement savings while also lowering her taxable income.

Stop thinking like an employee when it comes to retirement. You gave up the corporate safety net for freedom. Now use that freedom to potentially save more for retirement than your traditionally employed peers ever could.

Ready to Claim Your Self-Employed Savings Advantage? PensionBee Can Help

Being self-employed means you’re in charge of your own retirement plan, which is both a responsibility and a privilege. Without an employer-sponsored plan or match, you’ll need to be proactive about saving. The upside? You get to choose the plan, set the pace, and potentially save even more than you could in a traditional job.

If you want a straightforward, flexible way to save more with higher contribution limits on your own terms, PensionBee’s SEP IRA (available exclusively for sole proprietors) could be the retirement solution your business needs. With five investment portfolios built using ETFs powered by State Street, you benefit from institutional expertise without the complexity. You can start fresh with tax-advantaged savings and even roll your old retirement accounts, like 401(k)s or IRAs, into one place. This gives you a clear view of your savings and helps you confidently plan your next steps. Plus, our dedicated account managers, called BeeKeepers, guide you every step of the way, so you can focus on the retirement you deserve.

Your investment can go down as well as up. This post, and any associated customer testimonial or third party endorsement, is provided solely for informational and educational purposes, should not be taken as tax, legal, financial or investment advice and is not an offer, solicitation, or recommendation to buy or sell any securities or investments.

Popular

1

Retirement Under a New Administration

Jatniel Brito

2

Future Planning for Couples

Jatniel Brito

3

Retirement Inequalities in 2025

Jatniel Brito

4

Retirement Planning for Women

Jatniel Brito

5

Tax Season Tips for Retirement

Summer Nevins

Be Retirement Confident.

Roll over all your old 401(k)s into a PensionBee Individual Retirement Account (IRA). It takes just a few minutes to sign up.

Get started
product shot showing the pensionbee app