This post is part of a 9-part series called “Turn Your Side Hustle Into a Tax-Saving Business.”
In this series, you'll learn how to legally lower your taxes, take advantage of IRS rules, and treat your side hustle like a real business.
Why Retirement Plans Matter for Self-Employed People
When you work for a company, you might get a 401(k) or pension.
When you're self-employed?
You're on your own — but that can actually be a huge opportunity.
You can:
Save for your future
Lower your taxable income
Choose from plans with higher contribution limits than regular IRAs
The 3 Most Common Plans for the Self-Employed
Let’s break them down simply:
✅ 1. SEP IRA (Simplified Employee Pension)
Great for: Freelancers and solo business owners
Max contribution: Up to 25% of net income, or $69,000 for 2024
Contributions are tax-deductible
Super easy to set up and manage
✅ 2. Solo 401(k)
Great for: Self-employed people with no employees (except a spouse)
Max contribution:
Employee side: Up to $23,000 (or $30,500 if age 50+)
Employer side: Up to 25% of your net business income
Total max: $69,000 ($76,500 if 50+) in 2024
Offers Roth and traditional options
Can take out loans (optional)
✅ 3. SIMPLE IRA
Great for: Small business owners with employees
Max contribution: $16,000 ($19,500 if 50+)
Employer must match or contribute
Easier and cheaper than a 401(k), but lower limits
How This Lowers Your Tax Bill
All of these plans offer tax-deferred growth, meaning:
You don’t pay taxes on the money now
You only pay taxes when you withdraw it in retirement
If you contribute $15,000 to a SEP IRA:
You just lowered your taxable income by $15,000
That could save you thousands in taxes this year
Example
Net business income: $60,000
SEP IRA contribution (25%): $15,000
New taxable income: $45,000
Possible tax savings: $3,000–$4,000 depending on your bracket
That’s real money saved now while building a more secure future.
Pro Tips
You don’t need to incorporate to use these plans
You can open one at most brokerage firms (Avantax, Fidelity, Vanguard, etc.)
You usually have until tax day (plus extensions) to make contributions for the prior year
Final Thoughts
Being self-employed doesn’t mean missing out on retirement benefits — it means you get to choose the best one for your goals. And the tax savings? That’s just the cherry on top.
Ready to unlock even more savings?
👉 Up next— Gig Workers Are Business Owners Too Whether you drive, deliver, design, or freelance, you may already qualify for deductions you didn’t know about.