Every year the IRS adjusts retirement contribution limits for inflation. If you’re self-employed, knowing the new numbers helps you decide how much to save and which account gives you the most room.
This article is educational, not personalized tax or financial advice. Limits and rules can change, so always confirm the numbers on IRS.gov.
2027 Limits at a Glance
| Limit | 2026 (official) | 2027 |
| Solo 401(k) employee deferral | $24,500 | [2027: fill in] |
| Catch-up, age 50+ | $8,000 | [2027: fill in] |
| Catch-up, ages 60–63 | $11,250 | [2027: fill in] |
| Total Solo 401(k) / SEP IRA limit (before catch-up) | $72,000 | [2027: fill in] |
| Maximum compensation counted | $360,000 | [2027: fill in] |
| IRA limit (traditional + Roth combined) | $7,500 | [2027: fill in] |
| IRA catch-up, age 50+ | $1,100 | [2027: fill in] |
Update this table once the IRS announces the official 2027 figures.
How the Solo 401(k) Limit Works
A Solo 401(k) lets you contribute in two roles: as the employee and as the employer. That’s why it can allow more savings than other plans at moderate incomes.
1. Employee deferral. For 2026, you can defer up to $24,500 of your earnings (or 100% of your net self-employment earnings, if lower). The 2027 limit is [2027: fill in].
2. Employer contribution. As the business owner, you can also contribute up to roughly 20% of your net self-employment earnings if you’re a sole proprietor or single-member LLC taxed that way. Net self-employment earnings means your profit after subtracting half of your self-employment tax.
3. The overall cap. Employee and employer contributions together can’t exceed the total limit ($72,000 in 2026, before catch-up contributions).
Catch-up contributions add more if you’re age 50 or older. A higher catch-up applies for ages 60 to 63.
How the SEP IRA Limit Works
A SEP IRA only has employer contributions. For self-employed people, the limit is generally the lesser of:
- Roughly 20% of your net self-employment earnings, or
- The total annual limit ($72,000 for 2026, [2027: fill in] for 2027)
There is no catch-up contribution for a SEP IRA. Also, the IRS caps the amount of compensation that can be counted ($360,000 in 2026).
A Simple Example
Say a freelancer earns an $80,000 net profit and is under 50. These are rough, rounded numbers using the 2026 limits, for illustration only:
- Self-employment tax is about $11,300, and half of it is about $5,650.
- Net self-employment earnings for plan purposes are about $74,350.
- 20% of that is about $14,870.
| Account | Approximate maximum |
| SEP IRA | about $14,870 |
| Solo 401(k) | $24,500 (employee) + about $14,870 (employer) = about $39,370 |
At this income level, the Solo 401(k) allows far more, because the employee deferral is a fixed dollar amount rather than a percentage. The gap gets smaller as income rises. The exact calculation has details (such as how the contribution itself affects the figure), so use the IRS worksheets in IRS Publication 560 or consult a professional.
Solo 401(k) vs. SEP IRA for 2027
| Solo 401(k) | SEP IRA | |
| Who can use it | Self-employed with no employees (other than a spouse) | Self-employed, may have employees |
| Employee deferral | Yes | No |
| Catch-up contributions | Yes | No |
| Roth option | Often available, depends on provider | Often available, depends on provider |
| Setup complexity | A bit more paperwork | Very simple |
| Annual filing | Required when assets pass a threshold | Not required |
For a deeper comparison, read SEP IRA vs. Solo 401(k). To compare providers, see Best Solo 401(k) Providers Compared.
What About a Roth IRA?
You can also contribute to an IRA in addition to a Solo 401(k) or SEP IRA, but the IRA limit is separate and much lower. Roth IRA eligibility depends on your income. Read Roth IRA for the Self-Employed for the details.
Deadlines to Remember
- Solo 401(k) employee deferrals: generally need to be elected by December 31 of the tax year. Rules for new plans can differ, so check with your provider.
- Solo 401(k) employer contributions and SEP IRA contributions: generally by your tax filing deadline, including extensions.
- IRA contributions: by the April filing deadline.
If you want to open an account in time, our guide to opening a SEP IRA walks you through the steps.
Tips for Using the New Limits
- Don’t focus on the maximum. The best limit is the one you can sustain. Our article on how much freelancers should save for retirement can help you pick a realistic target.
- Contribute based on actual profit. Your limit depends on net earnings, so wait until you know your year-end numbers where possible.
- Plan for cash flow. Irregular income makes large contributions harder. Consider contributing a set percentage after each payment.
- Coordinate with taxes. Contributions can lower your taxable income, which is covered in our Year-End Tax Planning Checklist.
Frequently Asked Questions
When does the IRS announce the new limits?
Usually in the fall, often by mid-November. Check the IRS retirement plans page for the official numbers.
Can I contribute to both a SEP IRA and a Solo 401(k)?
You can have both in some situations, but the total employer contributions across plans are limited, and the rules are complicated. Talk to a tax professional first.
Do the limits apply per account or per person?
The employee deferral limit applies to you across all 401(k) plans in a year. If you also have a job with a 401(k), that matters.
What if I earn less than the limits?
Your contribution is capped by your earnings, so you may not reach the maximum. Contribute what you can.
Can I contribute if I have employees?
A Solo 401(k) is generally for owners without full-time employees. A SEP IRA may require contributing for eligible employees as well.
Final Thoughts
Contribution limits tell you the ceiling, not the goal. Use the numbers above as a guide, check the official figures for 2027, and build a savings plan that matches your income. Even small, regular contributions add up over time.
Disclaimer: This article is for informational and educational purposes only and does not constitute tax, legal, or financial advice. Contribution limits and rules change and depend on your situation. Verify current figures at IRS.gov or consult a licensed tax professional or financial advisor.
Last Update: October 9, 2026