Most freelancers who are serious about retirement end up using a SEP-IRA or Solo 401k as their main account, since those allow far larger contributions. But a regular IRA, either Roth or Traditional, still has a real place in the picture. It is simple to open, costs nothing to maintain, and for many freelancers it works best as a second account layered on top of a SEP-IRA or Solo 401k rather than a replacement for one.
This guide covers how the two types compare for someone with self-employment income, what the 2026 limits and income rules actually are, and when each one makes more sense.
Why a Regular IRA Still Matters Even If You Have a SEP-IRA or Solo 401k
A Roth or Traditional IRA is not designed to be your primary retirement vehicle as a self-employed person, since the contribution limit is far lower than what a SEP-IRA or Solo 401k allows. What it offers instead is tax diversification and, in the case of a Roth, a different kind of tax treatment in retirement that neither of the larger plans typically provides in the same way.
You are allowed to contribute to a SEP-IRA or Solo 401k and a Roth or Traditional IRA in the same year, as long as you meet the income requirements for each. Many freelancers max out the larger plan for the immediate deduction, then add a Roth IRA on top specifically for the tax-free growth.
How a Traditional IRA Works for Self-Employed People
A Traditional IRA lets you contribute pre-tax dollars, which can reduce your taxable income for the year if you qualify for the deduction. The account grows tax-deferred, and you pay ordinary income tax on withdrawals once you start taking them in retirement.
For 2026, the contribution limit is $7,000, or $8,000 if you are 50 or older. This limit applies to your combined contributions across all your Traditional and Roth IRAs, not to each account separately. There is no income limit that blocks you from contributing to a Traditional IRA, regardless of how much you earn.
The deduction is where things get more specific for self-employed people. If you also contribute to a SEP-IRA or Solo 401k, the IRS treats you as covered by a workplace retirement plan, which means your ability to deduct Traditional IRA contributions phases out at higher income levels. For 2026, that phase-out for a single filer covered by a plan like a SEP-IRA generally falls in a range around the high five figures to low six figures of modified adjusted gross income, after which the deduction disappears entirely. Below the phase-out, you get the full deduction. Inside the range, the deduction shrinks proportionally.
How a Roth IRA Works for Self-Employed People
A Roth IRA works in the opposite direction. Contributions go in after tax, so there is no deduction the year you contribute. In exchange, the money grows completely tax-free, and qualified withdrawals in retirement are entirely tax-free as well, with no tax owed on any of the growth.
The 2026 contribution limit matches the Traditional IRA at $7,000, or $8,000 if you are 50 or older, and again applies to your combined Traditional and Roth contributions together.
The defining feature of a Roth IRA is the income limit. For 2026, single filers can make a full contribution if their modified adjusted gross income is below roughly $150,000, with the amount phasing out completely by around $165,000. Married couples filing jointly see a similar phase-out starting around $236,000 and ending near $246,000. Above the upper limit, you cannot contribute directly to a Roth IRA at all.
For self-employed people, earned income for Roth IRA purposes means your net self-employment income, gross revenue minus your legitimate business expenses. This is an important detail, because a freelancer who had a loss year with $0 in net self-employment income cannot contribute to a Roth IRA for that year, even if they had other income such as dividends or rental income, since those do not count as earned income for this purpose.
Side by Side Comparison
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| 2026 contribution limit | $7,000 ($8,000 if 50+) | $7,000 ($8,000 if 50+) |
| Tax treatment going in | Deductible, subject to income phase-out if covered by another plan | Never deductible |
| Tax treatment on withdrawal | Taxed as ordinary income | Completely tax-free if qualified |
| Income limit to contribute | None | Phases out around $150,000–$165,000 single, $236,000–$246,000 married |
| Required minimum distributions | Yes, starting at age 73 | None during your lifetime |
| Withdrawal of contributions before 59½ | Taxed and penalized in most cases | Contributions (not earnings) can be withdrawn any time, tax and penalty free |
How This Plays Out for a Freelancer Using a SEP-IRA
Most self-employed people considering a Roth or Traditional IRA are already contributing to a SEP-IRA or Solo 401k, and how the two interact depends heavily on income level.
Consider a freelancer with $60,000 in net self-employment income. They could contribute roughly $11,000 to a SEP-IRA based on the standard self-employed contribution formula, taking the deduction on that amount. Since their income is well under the Roth phase-out threshold, they can also contribute the full $7,000 to a Roth IRA on top of that, giving them both an upfront deduction from the SEP-IRA and a pool of money in the Roth that will never be taxed again.
Now consider a freelancer with $120,000 in net self-employment income. Their Roth eligibility depends on where their modified adjusted gross income lands after the SEP-IRA contribution is subtracted, since SEP contributions reduce MAGI. If the SEP-IRA contribution brings them back under the Roth phase-out threshold, they preserve full or partial Roth eligibility even at a fairly high income level. This is one of the more useful interactions for self-employed people specifically, since the SEP-IRA contribution is doing double duty, reducing current taxable income and protecting Roth eligibility at the same time.
The Backdoor Roth IRA for Higher Earners
If your income is above the Roth IRA phase-out entirely, there is still a path in, commonly called a backdoor Roth IRA. You contribute to a Traditional IRA with after-tax dollars, since at high income you would not get the deduction anyway, and then convert that balance to a Roth IRA shortly afterward.
This strategy is legal and widely used, and it requires filing IRS Form 8606 to report the nondeductible contribution and the conversion correctly. The complication arises if you already have other pre-tax money sitting in Traditional IRAs from previous years, since the IRS applies a pro-rata rule that can make part of the conversion taxable based on the ratio of pre-tax to after-tax money across all your Traditional IRA accounts combined. If you have old rollover IRAs sitting around, it is worth talking to a CPA before attempting a backdoor Roth to understand exactly how much of the conversion would be taxable.
A Self-Employed-Specific Advantage: Funding After Year-End
One detail that benefits freelancers more than W-2 employees is the contribution deadline itself. You can make a Traditional or Roth IRA contribution for a given tax year any time between January 1 of that year and the tax filing deadline the following April, generally without needing to count an extension. Because freelancers often do not know their final net income for the year until well after December 31, this window lets you wait until you actually know your numbers before deciding how much to contribute and to which account.
When you contribute during that window between January 1 and the filing deadline, you need to specify which tax year the contribution applies to, since the same window technically overlaps two different tax years.
Which One Should You Choose
If you expect to be in a lower tax bracket in retirement than you are now, the Traditional IRA’s upfront deduction is generally worth more than the Roth’s tax-free withdrawals, assuming you qualify for the deduction in the first place.
If you expect to be in a similar or higher tax bracket in retirement, or you simply want a portion of your savings that will never be taxed again regardless of how tax rates change in the future, the Roth IRA is the stronger choice, as long as your income falls under the phase-out threshold.
Many freelancers do not have to choose definitively, since splitting contributions between the two within the same $7,000 limit is allowed, and combining either with a SEP-IRA or Solo 401k for the bulk of retirement savings is the more common approach in practice. For a full comparison of those higher-limit accounts, see our SEP-IRA vs Solo 401k guide.
Frequently Asked Questions
Can I contribute to both a SEP-IRA and a Roth IRA in the same year?
Yes, as long as you meet the income requirements for the Roth IRA. The two accounts are governed by separate rules, and contributing to a SEP-IRA does not use up any of your personal IRA contribution limit.
What happens if I contribute to a Roth IRA and then have a higher income year than expected?
If your actual income ends up above the Roth phase-out threshold after you have already contributed, you generally need to recharacterize or withdraw the excess contribution before your tax filing deadline to avoid a 6 percent excise tax that applies each year the excess remains in the account.
Does my spouse’s income count toward the Roth IRA limit if we file jointly?
For married couples filing jointly, the income limits are based on combined household modified adjusted gross income, not just the freelancer’s net self-employment income. A spousal IRA also allows a non-working or lower-earning spouse to contribute based on the working spouse’s income, as long as the couple files jointly and has enough combined earned income.
Is a SEP-IRA contribution treated as covering me for Traditional IRA deduction purposes?
Yes. If you contribute to a SEP-IRA, the IRS treats you as an active participant in an employer-sponsored plan for the year, which can phase out or eliminate your ability to deduct a Traditional IRA contribution depending on your income.
Final Thoughts
For most freelancers, a SEP-IRA or Solo 401k should come first, since the contribution limits are dramatically higher and the tax savings on a larger contribution outweigh what a personal IRA alone can offer. A Roth or Traditional IRA works well layered on top, particularly the Roth, since the tax-free growth and the ability to withdraw contributions penalty-free in an emergency make it a flexible piece of an otherwise retirement-focused savings plan. Run your specific numbers, ideally with a CPA, since the interaction between your SEP-IRA contribution and your Roth eligibility can shift the right strategy depending on exactly where your income lands each year.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial, tax, or legal advice. Retirement account rules, contribution limits, and income thresholds vary by individual circumstances and are subject to change. Always consult a qualified financial advisor or CPA before making retirement planning decisions.