Retirement for Freelancers: SEP-IRA vs Solo 401(k) vs Roth IRA in 2026

Retirement accounts for freelancers in 2026

Freelancers can save up to $72,000 for retirement in 2026 through a SEP-IRA or solo 401(k), against $7,500 in a Roth or traditional IRA, under IRS 2026 limits, and every dollar comes from a rate built on 150,000+ Bureau of Labor Statistics wage records across 391 US metro areas instead of an employer match.

No employer means no match. Private-industry employers spend $1.57 an hour on retirement and savings, or 3.3% of total compensation, according to Bureau of Labor Statistics compensation cost data, and a freelancer funds that share and everything above it from client revenue. The comparison below shows what each account allows.

SEP-IRA vs solo 401(k) vs Roth IRA compared

A solo 401(k) allows more than a SEP-IRA at the same income because it stacks a $24,500 employee deferral on top of the employer contribution, while a SEP-IRA allows only the employer contribution of about 20% of net earnings. Both share the $72,000 overall cap for 2026 under the IRS 401(k) contribution limits.

A Roth IRA works differently. Contributions aren't deductible, but qualified withdrawals are tax-free, according to the IRS Roth IRA page, and the $7,500 limit applies across all IRAs combined. A self-employed saver can contribute to a Roth IRA and a SEP or solo 401(k) in the same year. Profit sets how much the larger accounts allow, as the next table shows.

How much you can contribute at each income level

At $100,000 of net profit, a SEP-IRA allows $18,587 and a solo 401(k) allows $43,087 for a freelancer under 50. The gap narrows as income rises, and at $250,000 of profit the solo 401(k) reaches $71,543, just under the $72,000 cap.

The SEP figure is about 20% of net earnings rather than 25%, because a self-employed person's compensation is net earnings minus half of self-employment tax and minus the contribution itself, per IRS Publication 560. Freelancers aged 50 or older can add $8,000 of catch-up deferrals to a solo 401(k), or $11,250 at ages 60 to 63. These are ceilings; what saving any amount does to the rate is the more useful number.

How to calculate what retirement saving adds to your rate

Retirement saving adds $2.81 to $8.50 to an $85 hourly rate: 3.3% replaces an employer's average retirement contribution, and 10% of revenue funds a larger plan. Across 1,100 billable hours, 10% of an $85 rate is $9,350 a year.

The math runs one way. Money moved into a retirement account doesn't reach take-home pay, so the rate has to rise to keep take-home pay level: a freelancer who wants $70,000 to live on and $10,000 saved needs an income target of $80,000 before tax, not $70,000.

Contributions to a SEP-IRA or a traditional solo 401(k) lower income tax in the year they're made, which softens that cost, but they don't lower the 15.3% self-employment tax. Retirement is one line in what freelancing actually costs, the page on how the floor rate works shows where it enters the formula, and the salary to hourly calculator converts a salary-plus-savings target into an hourly rate. Income, goals, and employees then shape which account holds the money.

How income, savings goals, and employees change the comparison

Income, savings target, and employees decide how the three accounts compare for a given freelancer. A Roth IRA holds up to $7,500 a year, a SEP-IRA about 20% of net earnings, and a solo 401(k) a $24,500 deferral plus that 20%.

Tax timing is the income question. SEP-IRA and traditional solo 401(k) contributions cut income tax now and are taxed at withdrawal; Roth contributions are taxed now and come out tax-free if qualified. The tax bracket today against the bracket in retirement decides which is worth more, a question for a CPA or licensed financial advisor.

Employees are the structural question. A SEP must contribute the same percentage of pay for eligible employees as for the owner, while a solo 401(k) covers a business with no employees other than the owner's spouse, per the IRS one-participant 401(k) page. Paperwork barely separates them: a solo 401(k) files Form 5500-EZ once assets reach $250,000, and SEP and Roth IRAs have no annual plan filing. From a client's side, all of this sits inside the rate.

What clients fund when a freelance rate includes retirement

Businesses that hire freelancers skip the retirement contribution an employer pays, 3.3% of total compensation or $1.57 an hour in private industry, according to Bureau of Labor Statistics data. The freelancer's rate carries that cost instead, along with the rest of a 30.0% benefits share.

For a client comparing an $85 freelance rate with an employee's wage, the retirement line explains part of the difference. An employee paid $36.36 an hour in wages and paid leave costs a private employer $46.89 an hour in total compensation, a 1.29 times multiple that already includes the employer share of payroll tax, and a freelance rate has to cover the same costs.

That multiple is the straightforward answer to a client who asks why a freelancer costs more per hour than staff. The cost of skipping retirement saving altogether is less visible, and it lands decades later.

What nobody tells you about saving for retirement as a freelancer

Freelancers lose retirement savings in the years income drops, because every account here is optional year to year. A SEP-IRA contribution can be $0 in a slow year and $27,881 in a year with $150,000 of profit, with no penalty for skipping.

That flexibility cuts both ways. Without payroll deduction, saving happens only when a transfer is scheduled, and a freelancer who decides at the tax deadline contributes from whatever cash is left. A fixed percentage moved from each client payment works the same way as a tax set-aside.

Social Security is the second gap. Self-employment tax funds Social Security benefits, with the 12.4% portion applying to earnings up to $184,500 in 2026, so under-reporting income to shrink that tax also shrinks future benefits. The questions below cover what freelancers ask most about these accounts.