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The Tactical IRA Playbook

A plain-English guide to self-employed retirement accounts. No jargon, no confusion — just what you need to know to maximize your tax savings.

Plain-English guide to maximize your tax savings.

Why Self-Employed Retirement Is Different

If you work for a company, retirement is simple: money comes out of your paycheck, goes into a 401(k), and you’re done. But when you’re self-employed, you’re both the employee and the employer — which means more complexity, but also more opportunity.

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The Opportunity: Self-employed individuals can contribute up to $70,000/year to retirement accounts — 10x more than a regular IRA. But most people contribute far less because they don’t know what’s possible.

The challenge? There are multiple account types, each with different rules, contribution limits, and tax treatments. Choose wrong and you could miss out on thousands in tax savings every year.

The Main Account Types Explained

SEP IRA (Simplified Employee Pension)

Best For

Sole proprietors with no employees
Simple setup and administration
High contribution limits (up to $70K)

Limitations

No Roth option
Must contribute same % for employees
Employer-only contributions

Solo 401(k)

Best For

Higher contribution potential
Roth option available
Loan provisions possible

Limitations

More paperwork
Can’t have employees (except spouse)
Annual filing if over $250K

Traditional IRA

Best For

Simple to open anywhere
Good starting point
Tax-deductible contributions

Limitations

Only $7,000/year limit (2026)
Not designed for self-employed
Income limits may apply

Roth IRA

Best For

Tax-free growth and withdrawals
No required minimum distributions
Ideal for younger/lower-income earners

Limitations

Only $7,000/year limit (2026)
Income limits ($161K single, $240K married)
No immediate tax deduction

Roth vs. Traditional: When to Use Each

The Roth vs. Traditional decision comes down to one question: Do you want to pay taxes now, or later?

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The Simple Rule: If you expect to be in a higher tax bracket in retirement than you are now, choose Roth. If you expect to be in a lower bracket, choose Traditional.

Choose Traditional When:

You’re in a high tax bracket now — Get the deduction when it’s worth the most
You expect lower income in retirement — Pay taxes later at a lower rate
You need to reduce this year’s tax bill — Every dollar contributed is deductible
You’re over 50 and catching up — Maximize tax-deferred savings in peak earning years

Choose Roth When:

You’re in a lower tax bracket now — Pay taxes at today’s low rate
You expect higher income later — Lock in tax-free growth
You want flexibility in retirement — No required minimum distributions
You’re young with decades to grow — Tax-free compounding is powerful over 20+ years
You want to leave money to heirs — Roth IRAs pass tax-free to beneficiaries

Are you in the 32%+ tax bracket?

Traditional contributions likely make sense — you’ll save more in taxes now

Are you in the 12-22% bracket?

Consider Roth — paying taxes now at a low rate is often advantageous

Do you have both types of income?

Split between both — tax diversification gives you flexibility

Combining Accounts for Maximum Benefit

Here’s the secret most people miss: you can often use multiple account types simultaneously to maximize both contributions and tax efficiency.

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Maximum Stack: SEP IRA ($70,000) + Roth IRA ($7,000) = $77,000/year in tax-advantaged contributions

Common Account Combinations

SEP IRA + Roth IRA

The most popular combination for high-earning self-employed professionals.

SEP IRA: Max out tax-deductible contributions (up to $70K)
Roth IRA: Add $7K of after-tax money for tax-free growth
Best for: High earners who want tax diversification

Solo 401(k) + Roth IRA

For those who want the Roth option within their primary retirement account.

Solo 401(k): Split contributions between Traditional and Roth
Roth IRA: Additional $7K if income allows
Best for: Mid-career professionals wanting flexibility

SEP IRA + Traditional IRA

Maximize tax deductions in high-income years.

SEP IRA: Primary high-contribution vehicle
Traditional IRA: Additional $7K deduction (income limits apply)
Best for: Those in peak earning years who need maximum deductions

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Important: Roth IRA contributions phase out at higher incomes ($161K single, $240K married in 2026). If you’re over these limits, consider a “Backdoor Roth” strategy — consult a tax professional.

Real-World Examples

Here’s how different self-employed professionals optimize their retirement accounts:

🦷 The Dentist

Profile: Dr. Sarah, solo practice owner, $350K net income, age 42

Her Strategy

SEP IRA: $70,000 (max contribution)
Backdoor Roth IRA: $7,000
Total: $77,000/year

Why It Works

SEP IRA reduces taxable income by $70K
Tax savings: ~$25,000/year
Roth provides tax diversification

🎧 The DJ / Event Professional

Profile: Marcus, freelance DJ and event producer, $85K net income, age 28

His Strategy

SEP IRA: $17,000 (20% of net income)
Roth IRA: $7,000
Total: $24,000/year

Why It Works

Lower bracket = Roth makes sense
SEP reduces current taxes
Variable income? Flexible contributions

💼 The Management Consultant

Profile: Jennifer, independent consultant, $220K net income, age 38

Her Strategy

Solo 401(k): $44,000 Traditional + $23,500 Roth
Total: $67,500/year

Why It Works

Solo 401(k) allows Roth contributions
Tax diversification built-in
Loan option if needed

📸 The Photographer

Profile: Alex, wedding/event photographer, $65K net income, age 31

Their Strategy

SEP IRA: $6,500 (10% of net income)
Roth IRA: $7,000
Total: $13,500/year

Why It Works

Prioritizes Roth while young
SEP provides some tax relief
Room to increase as income grows

💻 The Software Developer

Profile: Raj, freelance developer, $180K net income, age 35

His Strategy

SEP IRA: $36,000 (20% of net)
Roth IRA: $7,000
Total: $43,000/year

Why It Works

Significant tax deduction now
Roth for tax-free retirement income
Simple administration

🏋️ The Personal Trainer

Profile: Maya, independent fitness coach, $55K net income, age 26

Her Strategy

Roth IRA: $7,000 (max priority)
SEP IRA: $4,000 (when possible)
Total: $11,000/year

Why It Works

Low bracket = maximize Roth
40+ years of tax-free growth
Flexible with variable income

⚖️ The Attorney

Profile: Michael, solo practice lawyer, $400K+ net income, age 52

His Strategy

SEP IRA: $70,000 (max contribution)
Backdoor Roth: $7,000
Cash Balance Plan: $150,000+

Why It Works

Maximum tax deferral in peak years
Catch-up before retirement
Cash balance adds huge capacity

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The Pattern: Notice how everyone combines accounts based on their income level and tax bracket. There’s no one-size-fits-all — The Tactical IRA™ analyzes your specific situation and recommends the optimal mix.

Which Account Is Right For You?

The “best” account depends on your specific situation:

Do you have employees?

If yes → SEP IRA is usually simpler, but you’ll contribute for them too

Want Roth contributions?

If yes → Solo 401(k) or separate Roth IRA

Income over $100K?

If yes → Consider combining account types for maximum savings

Variable income?

If yes → SEP IRA’s flexible contribution rules help

Understanding Contribution Limits

This is where it gets confusing — but also where the biggest opportunities lie.

Account Type	2025 Limit	Notes
Traditional/Roth IRA	$7,000	+$1,000 catch-up if 50+
SEP IRA	$70,000	Limited to 25% of compensation
Solo 401(k)	$70,000	Employee + employer portions

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The 20% Rule: For SEP IRAs, you can only contribute up to 20% of your net self-employment income (not 25% as often quoted). The math: 25% ÷ (1 + 25%) = 20%.

The Tactical Approach

Instead of picking one account and hoping for the best, the tactical approach means:

1 Analyze your situation
Business structure, income patterns, employees, goals
2 Design the right mix
Often combining 2-3 account types maximizes savings
3 Contribute strategically
Time contributions based on income certainty
4 Adjust when needed
As your business changes, optimize the strategy

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