Best IRAs for Self-Employed, Gig Workers
Retirement plans aren’t just for corporate workers. If you are self-employed or a gig worker, even part-time, you can save for the future with an IRA. The key is knowing which IRA is best for you.
Key Takeaways
Self-employed and gig workers enjoy job freedom and flexibility, but they may miss out on important benefits, like a workplace retirement plan.
Whether you’re full-time self-employed or have a business or gig on the side, the money from those jobs can be saved for your future.
One way to save is in an IRA, and there are a few to choose from. Understanding their features can help you decide which might be best for you.
Freelancer. Gig worker. Sole proprietor. Or running a side business. These jobs can be for more than just income right now. You can stash away earnings from them for retirement.
Whether you manage your farm, post travel articles, paint apartments, sell jewelry online or pick up rideshare shifts, saving for your future should be a priority. Investing income from gig work or self-employment can help grow the money over time.
Those who are fully self-employed may already be saving for retirement in an individual 401(k). Still, many people don’t realize that income from a side gig qualifies for retirement, too, and you can save in an IRA. With different types of IRAs available, knowing which one may be right for you is the trick.
Gig Workers Fall Behind in Savings and Planning
More than one-third of the U.S. workforce now does gig work, and it’s their primary source of income.1 This year, the number of self-employed workers is projected to rise to half. However, working independently without an automatic and consistent way to save, such as in a workplace retirement plan, may cause a retirement savings gap.2
Because gig workers tend to be younger, they may not consider saving for retirement when it seems so far away. For those who do save, the amounts tend to be lower than those who save in a workplace plan. And there may be some good reasons why.
Gig workers' income may fluctuate more, and it takes more discipline to save without an employer’s retirement or pension plan to lean on. Independent workers also do not have the opportunity for an employer match. Plus, they are solely responsible for all their Social Security and Medicare taxes on their income from the gig or part-time job.
Gig Work: The New Way to Save for Retirement?
While many people freelance because they enjoy the flexibility and freedom of working independently, some full-time workers use gigs or part-time work to fund their futures because they don’t feel they have saved enough. An IRA can work in this situation, too.
Self-employed individuals have the same opportunities to boost their savings by contributing to an IRA in addition to a 401(k) or another workplace plan. Some people contribute to an IRA when they’ve maxed out their 401(k).
Retirement Planning for Self-Employed: Work Forever?
Some self-employed individuals may not be planning for retirement for the reasons listed above, but a good number of them also believe they’ll keep working to age 70 or older, or not retire at all.3 However, this may be an unrealistic expectation, and it truly isn’t a plan at all.
Even without a written plan, self-employed and gig workers can put money away for their futures. And using an IRA also comes with some tax benefits, whether you’re running your own business or working part-time for extra income. Understanding the different features can help you decide which IRA may be best for you.
Best IRAs for Gig or Self-Employed Workers
IRAs are tax-advantaged investment accounts that are available to anyone with earned income. They can be particularly helpful for people who don’t have access to an employer-based retirement plan. Or they can supplement an employer plan. Read on to learn about three types of IRAs that may benefit the self-employed or gig workers and how they work, including a quick comparison before we get into the details of each.
Compare IRAs for Self-Employed, Gig Workers
SEP IRA | SIMPLE IRA | Roth IRA | |
|---|---|---|---|
For | Self-employed, gig workers, sole proprietors and small businesses of any size | Small business owners with fewer than 100 employees (even if the one employee is you) | Anyone who earns income that falls within certain limits |
2025 Contribution Limits | 25% of income up to $69,000. | $16,500 (under 50), $20,000 (over 50) | $7,000 (under 50), $8,000 (over 50) |
Good to Know | Contributions are not required every year | Contributions are required every year; Employers match some contributions or contribute a flat percentage | Account owners contribute for themselves |
Taxes | Pre-tax contributions may be tax-deductible for your business | Employee pre-tax contributions; Employer contributions may be business tax-deductible | Qualified withdrawals are tax-free in retirement |
SEP IRA
A Simplified Employee Pension (SEP) IRA is designed for self-employed workers and small business owners. In essence, you’re the “employer” putting in money from your business on behalf of yourself. Note that only “employers” are allowed to contribute to a SEP; employees cannot.
If you have a good side hustle, a SEP IRA may let you save more than other IRA options because the limit on how much money you can add is higher.
Contribution Limit
A SEP allows you to contribute up to 25% of your total compensation, up to $69,000 for 2025. The IRS may adjust the limit each year.
To determine how much you can contribute, you will use a special IRS calculation . For most sole proprietors, it translates to roughly 20% of net profit. Here’s an example.
Net profit from your business | $40,000 |
20% of the net profit and the amount you could contribute to the SEP | $8,000 |
Compare that to a traditional or Roth IRA. Those let you contribute up to $7,000 per year ($8,000 if you’re over age 50), regardless of how much you earn. With a SEP account, however, in a good year, you could sock away more savings from your business.
Another advantage is that you’re not required to invest money every year. That means that if you work less for one year or take a break from your gig work, you can skip contributions that year. Plus, money you put in a 401(k) at your day job doesn’t affect how much you can save in a SEP.
Tax Implications
Like a traditional IRA, SEP contributions are tax-deductible and grow tax deferred. The money you put in your SEP reduces your taxable income, so you get a lower bill for that year. And you don’t pay taxes until you withdraw, which can begin after age 59½.
If you withdraw money before that age, you must pay a 10% tax penalty and income taxes. IRA plans allow a few early withdrawal exceptions (for things like higher-education expenses or health insurance premiums if you’re unemployed). In those cases, the penalties are waived.
At age 73 (age 75 in 2033), you must take a required minimum distribution (RMD) from the SEP IRA.
SIMPLE IRA
A Savings Incentive Match Plan for Employees, or SIMPLE IRA, is another retirement account for small business owners, self-employed people or nontraditional workers. It has lower contribution limits than SEP IRAs but higher limits than other IRAs.
Contribution Limit
For 2025, the maximum you can put in from your earnings is $16,500 with an extra $3,500 “catch-up” allowed for those 50 or older.
If you have a full-time day job and contribute to a company 401(k), you can contribute a maximum of $23,000 across both accounts, and $30,500 if you’re age 50 or older. The limit makes the SIMPLE a bit different from a SEP account.
On the upside, you can put 100% of your earnings (up to $16,500 or $20,000 if 50 or older) into your SIMPLE IRA. If you have a side gig that doesn’t earn more than $10,000, you could save that whole amount in a SIMPLE IRA, as long as you don’t exceed the total limit across retirement plans.
One more thing to know: Employers must make contributions every year. That’s different from a SEP.
Tax Implications
SIMPLE contributions are tax-deductible and grow tax-deferred. You don’t pay taxes until you withdraw the money—just like a SEP. At age 73, the same RMD rules apply to SIMPLEs. Generally, you can’t take out money before age 59½ without penalties (with some exceptions). If you withdraw money within two years of your first contribution, you’ll pay an early withdrawal penalty of 25%.
Deciding between the two retirement plans for your business may depend on the size of your company and contribution flexibility among other factors. Learn how to decide between a SEP and SIMPLE IRA.
Roth IRA
Many people ask: Can the self-employed contribute to a Roth IRA? Yes, they can, even though the account is not explicitly meant for self-employed and small business owners in the same way SEP and SIMPLE plans are.
Anyone can open a Roth if they have earned income and don’t exceed the qualifying income threshold. The Roth may be a good choice for someone earning a lower side income.
Contribution Limit
For 2025, a Roth IRA allows a flat $7,000 annual contribution ($8,000 for those 50 and older). However, Roth owners do have income limits: Your modified adjusted gross income can’t exceed $165,000 (single filer) or $246,000 (married, filing jointly).
Tax Implications
Here’s where the Roth differs from all other IRAs: You pay taxes upfront because you use after-tax dollars to contribute. But that also means your retirement withdrawals aren’t taxed like other IRA withdrawals.
Another advantage is that you do not have to take a minimum distribution at age 73. You can keep putting in money beyond that age. And you can withdraw contributions penalty-free before age 59½. However, if you withdraw any investment earnings before age 59½, you’ll pay a 10% penalty. It’s a good idea to understand the difference between contributions and earnings if you need to withdraw before retirement.
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More Than One-Third of Gig Workers Rely on Gig Work as Primary Source of Income, TransUnion, October 2024.
The gig economy and the looming retirement crisis, RFI Global, October 2024.
Retirement in the USA: The Outlook of the Workforce, 25th Annual Transamerica Retirement Survey, March 2025.
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This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
IRA investment earnings are not taxed. Depending on the type of IRA and certain other factors, these earnings, as well as the original contributions, may be taxed at your ordinary income tax rate upon withdrawal. A 10% penalty may be imposed for early withdrawal before age 59½.
You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
SIMPLE IRAs:
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.
If withdrawals are made within the first two years of participation in the SIMPLE IRA, the penalty increases to 25%.
Roth IRAs:
Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.