Retirement Account Options for Self-Employed and 1099 Individuals
- Nisha Mehta, MD
- 7 days ago
- 10 min read
Many physicians in our online doctor communities appreciate having 1099 or self-employed income (regardless of whether or not they also have W2 income) because self employment comes with a lot of tax advantages, one of the largest of which is the ability to contribute more to tax-advantaged retirement accounts. Several retirement accounts exist specifically for self-employed individuals and small businesses, and may even offer higher contribution limits than traditional retirement accounts via employer-sponsored retirement plans. However, navigating these options can be confusing. Below, we cover the retirement account options available to self-employed and 1099 doctors to help you find the best option for your situation.
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Retirement account options available to 1099, self-employed, & W-2 individuals
There are a few tax-advantaged account options doctors can utilize regardless of whether they are a W-2 employee, a 1099 contractor, or are self-employed. These include:
Traditional IRA, Roth IRA, or Backdoor Roth IRA
While an individual retirement account (IRA) has a low annual contribution limit, it’s an option available to doctors with an earned income, regardless of what type of income that is.
Contributions can be tax deductible at certain incomes, but most doctors earn above the limit, so for most doctors, these are contributions with dollars that are taxed. Traditional IRAs grow tax-deferred (you don’t pay taxes on investment gains or dividends in your account, but pay taxes on both the gains and any deducted contributions when you pull funds out). Therefore, these may not have much of a tax advantage for many physicians.
Contributions to a Roth IRA are made with post-tax funds and grow tax free. Qualified withdrawals are also tax free, but there are income limits to be eligible to contribute to a Roth IRA, which most physicians again are above.
A popular and completely legal workaround is a Backdoor Roth IRA, which allows you to contribute to a traditional IRA and then convert those contributions to a Backdoor Roth IRA. The IRS implements something called the pro rata rule here, and taxes can apply if you have any pre-tax funds in your IRA accounts. Some of the retirement options we cover below can trigger this pro rata rule, as we’ll note in the following discussion.
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Using a Health Savings Account (HSA) as a retirement tool
While not a retirement account by definition, an HSA can act like a stealth retirement plan. If you are on a qualified high-deductible health insurance plan (HDHP), you are able to open an HSA and make pre-tax contributions. An HSA offers one of the best tax advantages of any account, as contributions are made pre-tax, grow tax free, and are tax free upon withdrawal for qualified medical expenses (that’s the caveat here).
With an HSA, you have the option to pay medical expenses now out of pocket, track your expenses, and reimburse yourself later on (say, in retirement). This is how an HSA is often used as a stealth retirement account. This method leverages the tax benefits by allowing your contributions to grow in the stock market and then providing tax-free income in retirement through reimbursements.
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The most common retirement account options for 1099 & self-employed individuals
Of the retirement options specifically available to 1099 and self-employed individuals, there are a few commonly discussed ones, as they are generally easy to set up and don't have minimum contribution requirements:
Solo 401(K), which may also be called a self-employed 401(k), one-participant 401(k), individual 401(k), solo-k, i401(k), uni-k, or one-participant k
SEP IRA
SIMPLE IRA
Most people select either the solo 401(k) or a SEP IRA, so we’ll focus primarily on these two options.
Solo 401(k) retirement account for self-employed & 1099 individuals
A solo 401(k) operates similarly to an employer-sponsored 401(k), but is designed specifically for self-employed individuals who don’t employ any full-time employees, with the exception of their spouse.
With a solo 401(k), as you’re self employed, you act as both the employer and the employee.
Key features of a solo 401(k) include:
The ability to contribute as both employer and employee
Often has an option for Roth contributions, regardless of your income (no income limits imposed like a Roth IRA)
Higher potential contribution limits
Is not considered under the pro rata rule for taxation purposes
Contribution limits:
Employee contributions can be made up to 100% of "earned income", up to a maximum total limit of $24,500 for 2026. An additional $8,000 in catch-up contributions is allowed if you’re 50-59 or 64+ and a catch-up of $11,250 is allowed for individuals 60-63.
Employer contributions can be made up to 25% of compensation, depending on how your entity is structured (~20% of net effective income after subtracting 1/2 of self employment taxes and contribution itself for sole proprietors and single member LLCs, 25% for corporate entities such as S corps and C corps).
The total maximum contribution between the employee and employer contributions for a participant is $72,000 for 2026 (plus catch-up at age 50+).
Calculating the maximum contribution limits can get complicated as your compensation amount can factor in things like deductions and expenses, not just gross earnings. We highly recommend working with an accountant to maximize your tax advantages contributions without running into an issue where you overfund your account.
If you have multiple 401(k)s available to you, such as an employer-sponsored 401(k) for your regular clinical job plus a solo 401(k) for your side gig, the employee contribution limit covered above applies across all 401(k)s you have totaled together. You cannot max out contributions to multiple accounts as an employee.
If you have multiple self-employed businesses, however, you can contribute as the employer to separate solo 401(k)s for each entity up to the employer match if you have the self-employed income under each to support it. The maximum of up to 25% of compensation for each entity still applies. Again, if you’re in this situation, we highly recommend working with an accountant to make sure you set up things properly, as you’ll want to ensure that the businesses are completely separate in the eyes of the IRS so you don’t run into any overfunding issues.
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SEP IRA
The SEP (Simplified Employee Pension) IRA is a retirement plan available for employers, including self-employed individuals.
Key features of the SEP IRA:
You contribute just as the employer / business owner; there is no employee side
Typically made with pre-tax funds*
Contributions are typically tax deductible*
Funds within a SEP IRA are considered for the pro rata rule for a Backdoor Roth IRA
Available if you have other employees
Note if you have other employees, you must contribute equally for all eligible employees. There are some nuances, but this is generally done by contributing the same percentage of income for all employees. If you have eligible employees, you cannot fund a SEP IRA just for yourself.
* Roth options may be potentially available after the Secure Act, but aren’t nearly as common, as up to 2023, only traditional contributions were allowed. If you have the ability to do a Roth option, while the contributions are made with after-tax dollars, the employee pays the taxes on the contribution, not the employer, so the employer can still receive a tax deduction.
Contribution limits:
Up to 25% of net earnings from self-employment (not including contributions for yourself)
Capped at $72,000 for the year for 2026
Since there is no employee contribution side to a SEP IRA–and since this is a separate vehicle than a 401(k) plan–you don’t have to worry about balancing contribution limits with contributions to an employer-sponsored 401(k) if you have a SEP IRA for your side gig.
Which is better for self-employed and 1099 individuals, a SEP IRA or a solo 401(k)?
Both the SEP IRA and the solo 401(k) have their advantages and disadvantages, so there is no one perfect solution.
For many self-employed physicians without an employer-sponsored plan, the solo 401k will be the better option in the situation where you don’t have any other employees and don’t make enough money to max out the SEP IRA.
One potential downside of the solo 401k is that after you reach a specific account balance threshold (currently $250,000 in 2026), you will have to file an annual form 5500 with the IRS. However, at that point, the tax savings of your compounding growth are usually worth the extra paperwork.
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SIMPLE IRA
A SIMPLE (Savings Incentive Match Plan for Employees) IRA is another option, though not as common for members of our online physician community. SIMPLE IRAs are available to small businesses with up to 100 employees.
Key features of a SIMPLE IRA:
Easy and inexpensive to manage
Mandatory employer contributions
Must make contributions for eligible employees
Lower maximum employee contribution limits than a solo 401(k)
Typically made with pre-tax funds*
Factors into the pro-rata rule for Backdoor Roth IRAs
Contribution limits:
The employer must either:
Provide a 100% match of employees’ contributions up to 3% of their earnings -or-
Contribute 2% of the employees’ earnings up to a stated compensation limit, which is $360,000 for 2026. (The basic contribution limits for the SIMPLE IRA as of 2026 are $17,000; those aged 50-59 and 64+ can save an additional $4,000 as a catch-up contribution & ages 60-63 can save a “super” catch-up contribution of $5,250 more. There are additional limits available for companies with 25 or fewer employees,.)
* Similar to the SEP IRA, the SIMPLE IRA was traditionally made with pre-tax contributions, but a Roth option became possible in 2023.
This can be a good option if you have employees, though note it can become costly the more employees you have.
If you make contributions as an employee, you can still contribute to another employer-sponsored retirement plan, such as a 401(k), but the total you can save across all plans is $24,500 for 2026. (This acts similar to a solo 401(k) when considering contributions to multiple plans.)
The defined benefit cash balance plan as an additional option for high earning self-employed & 1099 individuals
A solo 401(k) or SEP IRA can be a great fit for many physicians, especially if you’re looking for an option for your side gig income. If, however, you have a reliable, high-level of self-employed income and are looking to put substantial amounts of tax-advantaged money into retirement, you may want to explore additional tax advantages through a defined benefit plan.
A defined benefit plan is one of the most powerful retirement options available to high-earning 1099 or self-employed individuals, and functions similarly to a pension. These are far more complex than the other options highlighted above, and generally require contributions each year once the plan is established, so they aren’t a great fit for short-term or lower-income ventures. They also cost a decent amount to maintain as you typically need to run these through a company that can do the actuarial work associated with them.
Given their complexities, we highly recommend working with an accountant when assessing if a defined benefit plan is a tax strategy that will pay off for your situation.
Key features of a defined benefit plan:
Allows for very high annual contributions (can reach six figures)
Designed to provide a specific retirement benefit, rather than a set annual contribution
Requires a lot of expertise to set up and manage (you can’t run it yourself; requires annual actuarial calculations)
Comes with substantial administrative fees and paperwork
Allows you to have other tax-advantaged retirement plans, but contributions can affect how much you can put into other retirement accounts
Can require contributions for eligible employees, if any
Employee contributions are allowed, but generally the employer makes most or all of the contributions to guarantee the retirement benefit payout amount
Contribution limits:
Contributions are determined based on the defined guaranteed annual benefit at retirement, with different ways to calculate the benefit payout
Contributions are calculated by an actuary based on the set benefit and factors such as employees’ ages, expected returns on plan investments, and others
The maximum annual benefit limit (not contribution), depending on age, is $290,000 in 2026
Cash balance plans are a popular choice doctors consider for defined benefit plans. With cash balance plans, the retirement benefits are based on a cash balance formula in a hypothetical individual account that provides a fixed credit (the ‘pay credit’) given annually by the employer. There is also a guaranteed earned interested credit each year on the account balance. Again, these are complicated retirement vehicles. We’ve covered this in more detail separately, but recommend reaching out to professionals to help you navigate the nuances.
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Conclusion
Tax-advantage retirement savings as a 1099 or self-employed individual takes a little more forward planning and ongoing intention versus contributing to an employer-sponsored retirement plan, but there are options available, each with their own unique advantages. With options like the solo 401(k) and SEP IRA, self-employed doctors have access to powerful retirement tools. For self-employed doctors with a high level of steady income looking to maximize tax-advantages savings, a defined benefit plan such as a cash balance plan can also provide huge advantages.
When navigating options for the first time or considering a potential change, a financial advisor or tax professional can help you weigh your options and determine the best fit to ensure you’re maximizing your tax potential while minimizing potential risks and other tax implications with your self-employed retirement account(s).
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