Build retirement resources beyond the business itself.

An IRA can be a practical first step.

Self-employed people with eligible compensation can start with a traditional or Roth IRA, subject to the same contribution and income rules as other eligible savers. No large initial balance is required by tax law, though providers set account and investment minimums. Set an amount that fits uneven cash flow, then review after your tax professional estimates the year’s earnings.

IRA limits, deductions, and funding deadlines →

What is a Solo 401(k)?

A one-participant 401(k) generally covers a business owner with no eligible common-law employees other than a working spouse. As both employee and employer, the owner may make employee deferrals plus employer contributions. Hiring eligible employees can change the plan’s obligations; related businesses and employee-eligibility rules also matter.

For 2026, employee deferrals generally top out at $24,500, with applicable catch-ups. Combined employee and employer contributions generally cannot exceed $72,000 before catch-ups and are also limited by eligible compensation. You cannot contribute the maximum simply because the plan exists.

Self-employed earnings calculations differ from a corporate salary calculation. S-corporation shareholder distributions are not W-2 compensation for this purpose. If you also contribute to a day-job 401(k), coordinate employee deferrals across plans.

IRS: one-participant 401(k) plans ↗

Set up the plan before rushing to fund it.

1. Confirm eligibility, business structure, earnings, and any employees or related businesses.
2. Compare plan providers, investments, fees, Roth features, administration, and any loan provisions.
3. Adopt the correct plan documents and make required contribution elections on time.
4. Calculate employee and employer amounts separately and retain records.
5. Review reporting duties, including Form 5500-EZ when required and in the final plan year.

Deadlines differ for establishing a plan, electing deferrals, and depositing employer contributions. Employer funding may be allowed through the business return deadline, including extensions. Do not assume that applies to all employee deferrals. A limited first-year exception exists for certain sole proprietors with no employees; confirm eligibility and timing with your administrator before relying on it.

IRS Publication 560: self-employed calculations, deadlines and reporting ↗

Compare alternatives before choosing.

A SEP IRA may offer simpler employer-funded saving. A SIMPLE IRA may fit certain small employers with employees. Contributions, employee coverage, deadlines, costs, and Roth availability differ. Growing businesses may need a broader employer plan. Choose around the actual business, not a headline about the largest possible deduction.

IRS: compare self-employed plans ↗

What about self-directed real estate or private investments?

Some specially administered retirement arrangements can hold alternative assets, but standard workplace plans do not automatically allow them. Real estate, private businesses, and notes can involve illiquidity, valuation costs, fraud risk, and tax complexity.

Prohibited transactions involving you or certain related people can jeopardize tax benefits. Do not assume a retirement-owned property can be used personally, or that an LLC eliminates the restrictions. Debt-financed or operating-business investments can create unrelated-business tax issues. Seek specialized legal and tax advice before moving retirement funds into an alternative investment.

IRS: investment restrictions and prohibited transactions ↗

OBBB business tax provisions and retirement planning →

General education, not individualized tax, legal, investment, or rollover advice. Reviewed October 16, 2026. Annual limits are dated and do not update automatically. Confirm your situation with the plan administrator, a qualified tax professional, and an appropriately licensed investment professional. LI4W’s insurance services do not include managing a securities portfolio.