Retirement Savings for Gig Workers: SEP IRA, Solo 401(k), and Roth IRA

By Alex Marcel · Updated April 11, 2026

The Part Most Articles Skip

Retirement contributions reduce self-employment income (SE) before SE tax is calculated. That matters more for gig workers than for employees.

A W-2 employee who contributes to a 401(k) saves income tax on that contribution. A self-employed gig worker who contributes to a SEP IRA or pre-tax Solo 401(k) saves income tax plus about 14 cents per dollar in self-employment tax, because the contribution lowers the income base the SE tax rate is applied to.

On a $5,000 SEP IRA contribution, that’s roughly $700 saved in SE tax, plus income tax savings at your bracket rate. The total tax savings on that $5,000 contribution is often $1,200 to $1,800, depending on your situation. That’s real money, not a rounding error.

Most articles about retirement savings for gig workers lead with account types and skip the SE tax angle entirely. Starting there is why this matters enough to act on.

SEP IRA

The SEP IRA is the simplest account for self-employed workers. You open one at any major brokerage (Fidelity, Vanguard, Schwab, all offer them with no account fees), and you contribute whatever amount you decide up to the annual limit.

The contribution limit is roughly 20 percent of net self-employment income, up to the annual IRS maximum. The precise calculation is slightly below 20 percent because of how the SE tax deduction interacts with it, but 20 percent is a close working estimate. On $40,000 net self-employment income, the maximum contribution is around $7,500 to $8,000. On $80,000, around $15,000 to $16,000.

The key advantage is timing. You can open a SEP IRA and fund it for a prior tax year all the way up to your filing deadline, including extensions. File an extension to October and you have until October to fund your SEP IRA for the previous tax year. For gig workers who don’t know what they’ll owe until they sit down to file, this flexibility is significant. You can use the SEP contribution as a tax management tool after you see the full picture.

The main limitation is that the contribution is tied to your income. At lower income levels, the percentage cap means you can shelter less than you might want to.

Solo 401(k)

The Solo 401(k) has higher effective limits for lower-income gig workers, but it requires more planning.

You can make two types of contributions.

As the “employee,” you can contribute up to $23,500 (2025 limit; verify the current year at IRS.gov) regardless of income level, as long as you have at least that much in net self-employment earnings. This is the part that makes it more powerful than a SEP IRA at lower income levels. Even at $35,000 net income, you could contribute $23,500 as the employee contribution alone.

As the “employer,” you can contribute an additional 20 percent of net self-employment income on top of that, up to the combined annual limit.

For a gig worker earning $35,000 net: the SEP IRA caps at about $7,000. The Solo 401(k) can go up to $23,500 in employee contributions alone. The difference is substantial.

The catch is that a Solo 401(k) must be opened by December 31 of the tax year you want contributions to count toward. You can fund it later, but the account has to exist before year-end. If you’re reading this in March and haven’t opened one, you’re looking at the current tax year, not the prior one.

Solo 401(k) accounts are available at Fidelity (no account fees), Vanguard, Schwab, and E*TRADE. Fidelity’s version is often recommended because it handles the paperwork well and allows both traditional (pre-tax) and Roth contributions within the same account.

Roth IRA

A Roth IRA doesn’t reduce your current tax bill. Contributions are after-tax. What it does is build a pool of money that grows tax-free and can be withdrawn tax-free in retirement.

The contribution limit is $7,000 per year ($8,000 if you’re 50 or over) for 2025, with phase-outs at higher income levels. For most gig workers in the middle income range, eligibility isn’t an issue.

The case for a Roth IRA alongside a SEP IRA or Solo 401(k) is that pre-tax retirement accounts give you a tax break now but create taxable income later. A Roth IRA does the opposite. Having both in retirement gives you flexibility to control your tax situation when you’re withdrawing. Whether that matters depends on where you think your income and tax rates will be in retirement versus now.

For gig workers in low-income years (slow seasons, transitional periods, years with large deductions), a Roth IRA is worth considering because the tax you’d owe on contributions is low, and the tax-free growth lasts for decades.

The Roth IRA doesn’t interact with SE tax the way pre-tax accounts do. It’s a complement, not a replacement.

Which Account to Use

If your net self-employment income is below roughly $50,000 and you want to shelter a significant portion of it, a Solo 401(k) is usually better. The flat employee contribution lets you put away more than 20 percent of income.

If it’s past December 31 and you haven’t opened an account yet, a SEP IRA is your only option for the prior tax year.

If your income is high enough that 20 percent of net SE income already exceeds what you’d realistically contribute, a SEP IRA is simpler with no meaningful disadvantage.

If you have any room after maxing a pre-tax account and expect to be in a higher tax bracket in retirement, add a Roth IRA.

None of these require large sums to start. Opening a SEP IRA at Fidelity with $500 and contributing when you have it is better than waiting until you have the “right” amount. The account being open is the most important step.

The Practical Part

Opening any of these accounts takes about 20 minutes online. The brokerage handles the account structure; you just need your Social Security number (or EIN if you have one), routing and account number for the initial deposit, and the name of your business (your legal name is fine if you haven’t set up an entity).

Contribution deadlines:

SEP IRA: tax filing deadline, including extensions (October 15 if you file an extension)
Solo 401(k): account must be opened by December 31; contributions can be made up to the tax filing deadline
Roth IRA: tax filing deadline (April 15, no extension)

For how these contributions interact with your overall tax picture (SE tax, quarterly payments, and deductions), see our self-employment tax guide and the tax deductions article for the full picture on what reduces your taxable income before retirement accounts are even factored in.

Frequently Asked Questions

Can gig workers contribute to a retirement account?

Yes. Gig workers who file Schedule C have access to several tax-advantaged retirement accounts: the SEP IRA, Solo 401(k), and traditional or Roth IRA. The SEP IRA and Solo 401(k) are designed specifically for self-employed workers and have significantly higher contribution limits than the standard IRA. Contributions to a SEP IRA or traditional Solo 401(k) reduce your taxable self-employment income, which lowers both your income tax and your self-employment tax.

What is a SEP IRA and how does it work for gig workers?

A SEP IRA (Simplified Employee Pension) lets self-employed workers contribute up to approximately 20 percent of net self-employment income each year, up to the annual IRS limit. It's straightforward to open, contributions are tax-deductible, and you can open one up to your tax filing deadline including extensions, which means you can decide how much to contribute after you know what you owe. The main limitation is that the contribution is capped as a percentage of income, so lower earners can contribute less than they might with a Solo 401(k).

What is a Solo 401(k) and how is it different from a SEP IRA?

A Solo 401(k) (also called an Individual 401(k)) lets you make two types of contributions: an employee contribution of up to $23,500 for 2025 regardless of your income level, plus an employer contribution of up to 20 percent of net self-employment income. The total combined limit matches the SEP IRA ceiling, but the employee contribution piece means lower earners can shelter significantly more. The catch is that a Solo 401(k) must be opened by December 31 of the tax year you want to use it. You cannot open one retroactively the way you can with a SEP IRA.

Should I open a SEP IRA or a Solo 401(k)?

If your net self-employment income is below $50,000 and you want to contribute more than 20 percent of that income, the Solo 401(k) is almost certainly better. The flat employee contribution lets you shelter far more at lower income levels. If your income is higher and the percentage-based SEP IRA limit is already as much as you can contribute, the SEP IRA is simpler to maintain. The practical consideration is timing: if it's already past December 31 and you haven't opened a retirement account yet, a SEP IRA is your only option for the prior tax year.

Can I contribute to a Roth IRA as a gig worker?

Yes, if your income falls within the eligibility limits. Roth IRA contributions use after-tax money, so there's no immediate deduction, but withdrawals in retirement are tax-free. The contribution limit is $7,000 per year (2025) with a $1,000 catch-up for those 50 and over. Contributions phase out at higher income levels. A Roth IRA is worth considering as a complement to a SEP IRA or Solo 401(k), not a replacement. It doesn't reduce your current tax bill, but it builds tax-free income for later.

Do retirement contributions reduce self-employment tax?

Yes, indirectly. Contributions to a SEP IRA or traditional Solo 401(k) reduce your net self-employment income, which lowers the base that self-employment tax is calculated on. Every dollar contributed saves you roughly 14 cents in SE tax on top of whatever income tax savings you get from your bracket. This makes pre-tax retirement accounts more valuable for gig workers than for W-2 employees, who don't pay both sides of FICA.

Alex Marcel

Alex Marcel has driven for DoorDash, Grubhub, and other gig platforms. He covers car insurance, health coverage, and taxes for independent contractors at GigWorkerHQ.