Calculate your maximum self-employed retirement contribution for SEP-IRA, Solo 401(k), or SIMPLE IRA.
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Retirement planning is one of the most neglected aspects of freelance finances — and one of the most valuable, thanks to substantial tax advantages.
As a self-employed person, you have access to retirement accounts with much higher contribution limits than standard employee plans. A SEP-IRA allows sole proprietors to contribute approximately 20% of net self-employment income (the IRS-correct effective rate after deducting half of SE tax), up to $72,000 for 2026. A Solo 401(k) allows even more — combining employee contributions ($24,500 for 2026) with employer contributions (~20% of net income), up to the same annual cap.
Every dollar contributed to a traditional retirement account reduces your taxable income dollar-for-dollar. At the 22% federal bracket, a $20,000 SEP-IRA contribution saves you $4,400 in federal income tax. It also slightly reduces your SE tax since it lowers your adjusted gross income.
Start small if you must — even $200/month into a SEP-IRA grows significantly over decades thanks to compound growth and tax-deferred accumulation. The key is starting. Open a SEP-IRA (available at most major brokerages with no setup fees) and automate a monthly contribution from your tax account.
Self-Employment Tax
The 15.3% US tax paid by freelancers covering both the employer and employee portions of Social Security and Medicare.
Net Income
A freelancer's total earnings after deducting all business expenses and taxes — the actual profit the business generates.
Take-Home Pay
The net income a freelancer keeps after paying all taxes, business expenses, health insurance, and other deductions from gross revenue.
SEP-IRA is simpler: the IRS effective contribution rate for sole proprietors is ~20% of net SE income (max $72,000 for 2026). Solo 401(k) allows both employee contributions ($24,500 for 2026) plus ~20% employer contributions, for a potentially higher total. Solo 401(k) also allows Roth contributions and loans.
Every dollar contributed to a traditional SEP-IRA or Solo 401(k) reduces your taxable income by one dollar. At a 22% combined rate, a $10,000 contribution saves approximately $2,200 in federal income tax, plus reduces your SE tax slightly.
The deadline for SEP-IRA contributions is your tax filing deadline including extensions — typically October 15 for individuals. This gives you significantly more time than a 401(k) and allows you to wait until you know your actual annual income before contributing.
You can have both account types, but your total contributions across all accounts are limited to the annual defined contribution limit ($72,000 for 2026). Most freelancers choose one — Solo 401(k) for higher income earners who want maximum contributions, SEP-IRA for simplicity.
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