Freelancer Retirement and Health Insurance Basics (US Overview)
General information for US federal taxes. Not financial, tax or investment advice. Limits change every year. Confirm current figures at IRS.gov and ask a qualified professional.
When you leave an employer you also leave its retirement plan and health coverage. Both become your job. This overview covers the common options and what to check.
Retirement accounts freelancers use
| Account | Basic idea | Things to check |
|---|---|---|
| Traditional or Roth IRA | Individual account anyone with earned income can open | Annual limit, income limits for Roth and for deducting traditional contributions |
| SEP IRA | Employer-style plan; you contribute a percentage of net earnings as the "employer" | Contribution limit and the percentage calculation for self-employed people (IRS Publication 560) |
| Solo 401(k) | For a business with no employees other than you (and a spouse); you contribute as employee and as employer | Elective deferral limit; setup deadlines; paperwork once assets pass a threshold |
| SIMPLE IRA | Usually for small employers | Different limits |
The IRS lists the 2026 basic 401(k) elective deferral limit as $24,500 (or 100 percent of compensation, if less) and the SIMPLE IRA limit as $17,000; catch-up contributions may apply at age 50 and over. IRA, SEP and combined solo 401(k) limits are in IRS publications and change yearly, so check them before contributing.
Why this connects to taxes
Contributions to some plans reduce taxable income, which lowers income tax (but not self-employment tax, which is calculated on net profit before retirement contributions). See the tax set-aside example and SE tax explained.
How to choose (a framework, not a recommendation)
- Want simplicity and low paperwork? An IRA or SEP IRA is easy to set up.
- Want to save more per year? A solo 401(k) may allow higher total contributions, with more admin.
- Expect a lower income this year but higher later? The Roth versus traditional choice depends on expected future tax rates.
- Not sure? A fee-only financial planner or CPA can compare options for your numbers.
Self-employed health insurance
If you are self-employed and pay your own health insurance premiums, you may be able to deduct them. The IRS provides Form 7206 for the self-employed health insurance deduction, and eligibility rules apply (for example, if you can join an employer-subsidized plan through a spouse, you may not qualify for some months). Check IRS guidance or ask a professional.
You can also choose coverage through a marketplace, a spouse's plan, or a professional association; compare premiums, deductibles and networks. We do not rank plans.
Put it in the budget
Treat retirement contributions and premiums as fixed costs in your baseline month; see our irregular income budget. Include them when you work out your rate with the hourly rate calculator. Tracking both in accounting software such as QuickBooks Online or FreshBooks makes tax time easier.