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Retirement Options for 1099 Employees


The lure of self-employment continues to be popular for anesthesiologists.  It comes with flexibility in scheduling as well as the ability to travel.  Whether this is a full-time gig or in supplement to your W2 job, there are many options to manage your retirement when working as a 1099 employee. By Kayla Knuf, MD

As a 1099 employee, you are on your own to plan for retirement.  Two retirement plan options for self-employed and small business owners are the Simplified Employee Pension-Individual Retirement Account (SEP-IRA) and the individual 401(k).


The SEP-IRA has been hailed by different sources as simpler to set up than an individual 401(k).  Additionally, there are typically very low administrative costs with these accounts.  These accounts are basic individual retirement accounts (IRA) and similar to a traditional IRA.  

There are a few special things to note about SEP-IRAs.  First, there is no Roth option for SEP-IRAs, thus they can only be set up as traditional accounts (pay taxes later).  Additionally, employees cannot contribute to the plan and all contributions must be made by the employer.  Once the money is contributed to the plan, the funds are 100% vested (owned) by the employee.  Similarly to other retirement plans, any distributions taken before 59 ½ years of age will be taxed as income and subject to a 10% penalty (unless reason satisfies early withdrawal exception).  Employer contributions cannot exceed the lesser of 25% of the employee’s compensation or 69,000 for 2024.  There is no catch-up option for those > 50 years. If you have other employees, then you must contribute an equal percentage of compensation to them as well.  SEP-IRA contributions are tax deductible.  

One thing to consider is the limitation on the ability to do a backdoor Roth when using a SEP-IRA.  The backdoor Roth is subject to the IRS’s pro rata rule meaning that the IRS does not let you pick and choose what funds you want to convert.  The IRS will tax all pre-tax funds regardless of how or which funds you plan to convert to a Roth IRA. 

Individual 401(k)

The individual 401(k) is another option for retirement savings for the self-employed individual. The plans are typically more complicated and time consuming to set up compared with the SEP-IRA.  These accounts are designed for individuals, but spouses can also be eligible to contribute if working for the company.  Therefore, you cannot have any other employees except a spouse to utilize this retirement plan. 

The plans can be traditional or Roth in nature.  Additionally, both employers as well as employees can make contributions to this account.  Contribution limits are as follows.  Employers can contribute up to 25% of compensation (cannot exceed 69,000 for 2024).  Like a SEP-IRA, these contributions are usually deductible as a business expense. Additionally, employees can defer 100% of their compensation up to 23,000 into the individual 401(k).  This account also allows for catch up contributions of 7,500 for those over 50 years of age.  The combined employer plus employee contributions cannot exceed 69,000 for 2024 (if over 50, then 76,500).  There is often more flexibility in investment choices with a individual 401(k) versus a SEP-IRA.  Lastly, the individual 401(k) also allows for an option to take out a loan from the account (subject to rules and pay back) which is not possible with a SEP-IRA. 

Summary: Advantages of Each Account


  • Easier to set up. 
  • May have lower administrative costs.
  • Can be expanded to ALL employees if planning to hire additional employees in future.  
  • Contributions are tax deductible.

Individual 401(k): 

  • Both employees and employers can contribute. 
  • Less income required to max contribution (as 100% of employee compensation can be contributed up to 23,000 in 2024). 
  • May have more flexibility in investment choices. 
  • Ability to take out loan (subject to rules and pay back). 
  • Roth option exists.
  • Does not limit ability to do backdoor Roth. 
  • Catch up contributions possible for those over 50 years.
  • Contributions are tax deductible.



Kayla Knuf, MD is a board certified anesthesiologist who practices in Texas.

The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan. 


ASA Community Blog is published as a benefit for ASA members. The views expressed on this blog are those of the individual contributing writers only and do not necessarily represent the opinions of ASA.