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More than 25% of self-employed workers in the U.S. have no retirement savings at all, according to research from the Pew Charitable Trusts. This isn’t because they don’t care — it’s because the traditional retirement savings infrastructure was designed around employer-employee relationships. Two plan types were specifically designed to fix this: the SEP IRA and the SIMPLE IRA.
In 2024, employers can contribute up to 25% of each eligible employee’s compensation or $69,000 per person — nearly three times the standard 401(k) employee contribution limit. For a self-employed consultant earning $200,000, a SEP IRA could allow contributions of up to $50,000 annually.
Contributions are discretionary. If it’s a lean year, you contribute less. If it’s a banner year, you contribute more. There’s no minimum commitment that locks you in during down cycles — which makes the SEP IRA especially appealing for owners with variable income.
In 2024, employees can contribute up to $16,000 to a SIMPLE IRA, with a $3,500 catch-up for those 50 and older. Employers must contribute — either matching dollar-for-dollar up to 3% of compensation, or making a flat 2% contribution for all eligible employees.
The employee contribution element reduces the cost burden on the employer while creating engagement and ownership in the retirement benefit, which tends to increase its retention value.
A 52-year-old HR consultant in Dallas had accumulated less than $80,000 in retirement savings despite 20 years of successful independent practice. With $180,000 in annual income, she was eligible to contribute approximately $45,000 per year to a SEP IRA. Within eight years, her retirement savings had grown from $80,000 to over $600,000. The moral: starting now — at whatever age — is always better than waiting.
maximum SEP IRA contribution in 2024
of self-employed workers have zero retirement savings
2024 SIMPLE IRA employee contribution limit
Yes, but you’ll generally be required to make contributions for that employee at the same percentage you contribute for yourself. This makes SEP IRAs most economical for businesses with few or no employees.
You can open and fund a SEP IRA for a given tax year up until the tax filing deadline, including extensions. This flexibility makes SEP IRAs especially useful for year-end tax planning.
Yes, but there are rules. Employers with a SIMPLE IRA in place generally cannot terminate it mid-year. Transitions typically happen at the start of a new plan year with advance employee notification.
If you're self-employed or run a small business, you have more retirement savings options than you may realize. Let's talk through which plan fits your business and your goals.