When your income swings, the usual advice to “contribute X% of your paycheck” doesn’t fit well. The retirement accounts self-employed people use are forgiving, though: you don’t have to commit to an amount in advance. A SEP doesn’t require contributions every year, and several deadlines fall after the year ends. So you can save a percentage of each payment as it arrives, then decide the final amount once you know how the year went.
Step 1: Taxes first, then a buffer, then retirement
Every dollar that arrives has three claims on it, in this order:
- Taxes. Set aside your federal (and state) share of each payment in its own account. The set-aside guide gives the federal percentage by income level. Pay it out on the 2026 estimated tax dates.
- A cash buffer for the months when nothing comes in. This is practical advice, not an IRS rule. Without it, a slow quarter pushes you to dip into savings.
- Retirement. A fixed percentage of each payment, kept in a separate savings account until you contribute it.
Step 2: Know your deadlines, because most fall after year-end
For 2026 contributions:
| Account | Deadline for 2026 | Must contribute every year? |
|---|---|---|
| Traditional or Roth IRA | 2026 return's due date, not including extensions | No |
| SEP IRA: set up and fund | 2026 return's due date, including extensions | No |
| Solo 401(k): adopt a new plan, employer contribution only | 2026 return's due date, including extensions (if the provider allows retroactive adoption) | Depends on the plan's terms |
| Solo 401(k): employee deferral in a new plan (sole proprietor, no employees) | 2026 filing deadline, without extensions | Depends on the plan's terms |
Traditional or Roth IRA
- Deadline for 2026
- 2026 return's due date, not including extensions
- Must contribute every year?
- No
SEP IRA: set up and fund
- Deadline for 2026
- 2026 return's due date, including extensions
- Must contribute every year?
- No
Solo 401(k): adopt a new plan, employer contribution only
- Deadline for 2026
- 2026 return's due date, including extensions (if the provider allows retroactive adoption)
- Must contribute every year?
- Depends on the plan's terms
Solo 401(k): employee deferral in a new plan (sole proprietor, no employees)
- Deadline for 2026
- 2026 filing deadline, without extensions
- Must contribute every year?
- Depends on the plan's terms
Sources: Publication 590-A (IRA and Roth IRA deadlines; for 2025 contributions that meant April 15, 2026 for most people), Publication 560 (SEP setup and contribution deadlines; 401(k) adoption after year-end; IRS issue snapshot on contributions made after year-end, covering IRC 401(b)(2) and SECURE 2.0 section 317). Solo 401(k) plans have their own rules on the timing of employee deferral elections: check your plan documents.
So in January or February 2027, when your 2026 books are closed, you can look at your net profit and then choose how much goes where.
Step 3: Size the contribution to the year you had
This is what the same freelancer (single, under 50) could put away in three very different years, using the math from the contribution calculator:
| Net profit | SEP IRA max | Solo 401(k) max | Roth IRA (if eligible) |
|---|---|---|---|
| $40,000 (slow year) | $7,435 | $31,935 | $7,500 |
| $90,000 (typical year) | $16,728 | $41,228 | $7,500 |
| $150,000 (strong year) | $27,881 | $52,381 | $7,500 |
$40,000 (slow year)
- SEP IRA max
- $7,435
- Solo 401(k) max
- $31,935
- Roth IRA (if eligible)
- $7,500
$90,000 (typical year)
- SEP IRA max
- $16,728
- Solo 401(k) max
- $41,228
- Roth IRA (if eligible)
- $7,500
$150,000 (strong year)
- SEP IRA max
- $27,881
- Solo 401(k) max
- $52,381
- Roth IRA (if eligible)
- $7,500
SEP and Solo 401(k) figures from the calculator's logic: 20% of (net profit − half of SE tax), plus a $24,500 deferral for the Solo 401(k). Roth IRA limit from IR-2025-111; at $150,000 the Roth eligibility depends on your MAGI after other deductions (full contribution below $153,000 for single filers). The Roth IRA shares its $7,500 limit with any traditional IRA.
A rule of thumb from the same math: below the Social Security wage base, the maximum SEP contribution is about 18.6% of net profit ($184,500 of net earnings for 2026). That’s 20% of net profit after subtracting half of self-employment tax. So if you save 18.6% of every payment into your retirement account, you’ll have enough to max out a SEP after year-end. If you save more, a Solo 401(k) has room for it.
What that looks like over a lumpy year
Say a single freelancer under 50 ends 2026 with $90,000 of net profit, but it arrives very unevenly. They move 18.6% of each quarter’s profit into a retirement savings account as it comes in:
| Quarter | Net profit | Saved for retirement (18.6%) |
|---|---|---|
| Q1 | $10,000 | $1,860 |
| Q2 | $35,000 | $6,510 |
| Q3 | $5,000 | $930 |
| Q4 | $40,000 | $7,440 |
| Total | $90,000 | $16,740 |
Q1
- Net profit
- $10,000
- Saved for retirement (18.6%)
- $1,860
Q2
- Net profit
- $35,000
- Saved for retirement (18.6%)
- $6,510
Q3
- Net profit
- $5,000
- Saved for retirement (18.6%)
- $930
Q4
- Net profit
- $40,000
- Saved for retirement (18.6%)
- $7,440
Total
- Net profit
- $90,000
- Saved for retirement (18.6%)
- $16,740
The maximum 2026 SEP contribution on $90,000 of net profit is $16,728 (table above). The tax set-aside comes out of each payment first; see the set-aside guide for the federal percentage.
By the end of the year, $16,740 is in the account, enough for the $16,728 SEP maximum, without anyone guessing the year’s profit in advance. A slow Q3 meant a small transfer that quarter. If this freelancer had a Solo 401(k) and wanted to save more, the same account could feed its deferral too, up to the $41,228 shown above.
Step 4: Pick the account for the kind of year it was
- Slow year, low bracket: favor a Roth IRA. The deduction from a traditional contribution is worth little in a low bracket (for a single freelancer with $50,000 of profit, a $7,500 traditional IRA deduction saves $720, or 9.6%, as the Roth IRA guide shows), and Roth money comes out tax-free later. You also have until the filing deadline to decide.
- Typical year: a Roth IRA plus a SEP IRA (or Solo 401(k)) contribution sized to what you saved.
- Strong year, higher bracket: max out the pre-tax plan. A Solo 401(k) allows $24,500 more than a SEP at most income levels, and the deduction is worth more at 22% or 24%. For a commission-based version of this year, see Solo 401(k) for Real Estate Agents.
Step 5: Keep estimated taxes simple while you wait
You won’t know your final contribution, and so your final tax, until after year-end. Two IRS rules help:
- Safe harbor. Paying at least 100% of last year’s tax (110% if last year’s AGI was over $150,000) through timely estimated payments avoids the underpayment penalty, per the 2026 Form 1040-ES. You can pay a fixed, known amount each quarter, whatever your final retirement contribution turns out to be. See Estimated Tax Deadlines and the Safe Harbor Rule.
- Annualized installments. If most of your income lands late in the year, the annualized income installment method in Publication 505 can lower the required early payments. The quarterly estimated tax guide explains the regular method.
If the year ends in a loss
- SEP IRA or the employer side of a Solo 401(k): these contributions are a percentage of your net earnings from self-employment. With no net earnings, there’s nothing to base a contribution on. Publication 560 confirms that you don’t have to contribute every year, so you can skip the year.
- Traditional or Roth IRA: you can only contribute up to your taxable compensation for the year, per Publication 590-A, and a business loss doesn’t create any. If you also have W-2 wages, Publication 590-A says you don’t subtract a self-employment loss from those wages when figuring compensation, so the wages still count in full.
- If you’re married and file jointly: the Kay Bailey Hutchison spousal IRA rule in Publication 590-A lets the spouse with less compensation contribute based on the couple’s combined compensation. With a spouse who earns enough, you can still fund your own IRA in a loss year: up to $7,500 for 2026, or $8,600 at 50 or older (IR-2025-111). The total for both of you can’t exceed your combined compensation.
Common mistakes
- Missing the Solo 401(k) deferral election. With an existing plan, the employee deferral has to be elected by December 31, even though the money can come later. I explain the rule in Solo 401(k) vs. SEP IRA.
- Counting on the extended deadline without extending. The SEP, and the employer contribution of a Solo 401(k) you adopt after year-end, both run to your return’s due date including extensions (IRC 401(b)(2), as amended by section 201 of the SECURE Act), and that later date only applies if you extend your return. The deferral of a brand-new Solo 401(k) is stricter: it stops at the filing deadline without extensions (SECURE 2.0 section 317). Not every provider offers retroactive adoption. See the IRS issue snapshot.
- Putting more into an IRA than you earned. In a lean year, a $7,500 IRA contribution can exceed your taxable compensation. Publication 590-A says an excess contribution not withdrawn by your return’s due date (including extensions) is subject to a 6% tax, again every year it stays in the account.
- Funding retirement with the tax money. Contributions made after year-end come out of the same months as the balance due on your return and the first estimated payment of the new year. Pay the IRS first, then make the contribution from the retirement account you built up.
