Retirement & Health Savings For The Self-employed

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Retirement & Health Savings: Maximizing Contributions for Self‑Employed Business Owners in Michigan

If you’re self‑employed in Michigan, retirement planning and healthcare savings are entirely in your hands. While that can feel overwhelming, it also creates powerful opportunities to reduce taxes and build long‑term wealth when you use the right tools.

Two of the most effective retirement options for self‑employed individuals are the SEP‑IRA and the Solo 401(k). When paired with a Health Savings Account (HSA), these plans can significantly improve both your current tax position and your future financial security.

Let’s break down how these strategies work and how to maximize them.

Why Retirement Planning Matters More When You’re Self‑Employed

Unlike traditional employees, self‑employed business owners don’t have access to employer‑sponsored retirement plans or matching contributions. That means:

  • You must proactively set up and fund your own retirement plan

  • You’re responsible for understanding contribution limits and deadlines

  • Your choices directly impact your tax liability

The upside? Self‑employed retirement plans often allow much higher contributions than standard workplace plans.

SEP‑IRA: Simple and Powerful

A Simplified Employee Pension IRA (SEP‑IRA) is one of the easiest retirement plans to set up and maintain.

Key Features

  • Contributions are made by the business

  • You can contribute up to 25% of net self‑employment income (after adjustments)

  • High annual contribution limits (indexed annually by the IRS)

  • Contributions are tax‑deductible to the business

Best For

  • Sole proprietors and small businesses

  • Business owners with fluctuating income

  • Those who want minimal administrative complexity

Things to Consider

  • If you have employees, you generally must contribute the same percentage for them

  • No employee salary deferrals—only employer contributions

Solo 401(k): Maximum Flexibility & Higher Potential

A Solo 401(k) (also called an Individual 401(k)) is designed for self‑employed individuals with no employees other than a spouse.

Key Features

  • You contribute as both employee and employer

  • Allows higher total contributions compared to a SEP‑IRA at lower income levels

  • Optional Roth contribution feature

  • Potential for loan access

Contribution Breakdown

  • Employee deferral: You can defer a portion of your income

  • Employer contribution: Up to 25% of net self‑employment income

  • Combined contributions are capped at the IRS annual limit

Best For

  • High‑earning self‑employed professionals

  • Business owners focused on aggressive retirement savings

  • Those who want Roth flexibility

Things to Consider

  • Slightly more administrative responsibility

  • Annual filing requirements once assets exceed IRS thresholds

Health Savings Accounts (HSA): The Triple Tax Advantage

If you’re enrolled in a high‑deductible health plan (HDHP), an HSA is one of the most tax‑efficient savings tools available.

Why HSAs Are So Powerful

  • Contributions are tax‑deductible

  • Growth is tax‑free

  • Withdrawals for qualified medical expenses are tax‑free

In retirement, HSAs can be used for:

  • Medicare premiums

  • Out‑of‑pocket healthcare expenses

  • Long‑term care costs

After age 65, non‑medical withdrawals are allowed (subject to income tax, similar to an IRA).

Coordinating Retirement & Health Savings for Maximum Impact

The real magic happens when these strategies work together.

Smart Planning Tips

  • Prioritize Solo 401(k) or SEP‑IRA contributions to reduce taxable income

  • Fully fund an HSA if eligible

  • Time contributions strategically based on cash flow

  • Coordinate retirement planning with estimated tax payments

Together, these tools can:

  • Lower current‑year tax liability

  • Build long‑term, tax‑advantaged wealth

  • Reduce healthcare cost risk in retirement

Deadlines You Don’t Want to Miss

  • SEP‑IRA: Contributions can typically be made up to the tax filing deadline (including extensions)

  • Solo 401(k): Plan must be established by year‑end, though contributions may be made later

  • HSA: Contributions usually allowed up to the tax filing deadline

Proper planning ensures you don’t leave tax savings on the table.

Retirement Planning for Michigan Self‑Employed Professionals

Michigan self‑employed business owners face unique challenges, from fluctuating income to complex state and federal tax rules. Strategic retirement and health savings planning can reduce taxable income today while building long‑term financial security.

Whether you operate a sole proprietorship, LLC, or S‑Corporation, choosing the right combination of a SEP‑IRA, Solo 401(k), and HSA can make a meaningful difference in your overall tax strategy.

Work With a Local Michigan Accounting Firm You Can Trust

At CB Accounting, we specialize in self‑employed retirement planning in Michigan. We help business owners:

  • Determine whether a SEP‑IRA or Solo 401(k) is the best fit

  • Calculate and maximize allowable contributions

  • Coordinate retirement contributions with tax planning

  • Ensure compliance with IRS and Michigan requirements

If you’re self‑employed and want to lower your tax bill while planning confidently for the future, we’re here to help.

Call CB Accounting today at 616‑802‑4212 or schedule a consultation to review your retirement and health savings strategy.

Planning ahead now can create peace of mind later—for you and your business.