CalSavers vs. a Solo 401(k): What California Gig Workers and the Self-Employed Should Actually Use
Can self-employed people in California use CalSavers?
Yes. Although CalSavers was designed for employees at businesses without workplace retirement plans, self-employed Californians can enroll voluntarily at calsavers.com. The account works like a Roth IRA, with contribution limits set annually by the IRS. As of 2025, the limit is $7,000 per year, with a $1,000 catch-up for those 50 and older.
What is the contribution limit for a solo 401(k) in 2025?
For 2025, the IRS sets the total solo 401(k) contribution limit at $70,000 per year for most eligible self-employed workers, or $77,500 for those 50 and older, combining employee and employer contributions. These figures adjust annually, so verify the current limits at irs.gov or IRS Publication 560 before making contributions.
Is a solo 401(k) or CalSavers better for California freelancers?
It depends on income. CalSavers is simpler to open and manage, but caps contributions at the Roth IRA limit. A solo 401(k) allows much higher annual contributions and offers pre-tax options that reduce California state income taxes now. Higher-earning freelancers generally benefit more from a solo 401(k)'s larger contribution room and tax deferral.
Does California tax Roth IRA withdrawals in retirement?
California's treatment of Roth IRA withdrawals differs from the federal rules and can result in state taxation in some circumstances, even on distributions that are federally tax-free. The specifics depend on your situation, so confirm current California rules with the Franchise Tax Board at ftb.ca.gov or a tax professional before planning withdrawals.
When do you have to open a solo 401(k) to use it for the current tax year?
Generally, you need to establish a solo 401(k) account by December 31 of the tax year you want it to apply to, though you may have until your federal tax filing deadline to make the actual contributions. Rules can vary by plan type, so confirm the specific deadlines with your brokerage and current IRS guidance at irs.gov.
California's CalSavers mandate has pushed retirement savings into the spotlight for workers at small businesses, but if you're self-employed, a freelancer, or a gig worker, the program that gets the most attention may not be your best option. Here's what the two most practical choices actually look like for Californians who don't have an employer-sponsored plan.
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What CalSavers Is and Who It's Actually For
CalSavers is California's state-run retirement savings program, administered by the CalSavers Retirement Savings Board. It was designed primarily for employees whose employers don't offer a workplace plan. Workers at covered businesses are auto-enrolled unless they opt out, contributing to a Roth IRA-style account through payroll deductions. The contribution limits follow IRS Roth IRA limits, which as of 2025 sit at $7,000 per year for most people, with a $1,000 catch-up contribution allowed if you're 50 or older - but verify the current limits at calsavers.com, since the IRS adjusts these periodically.
Self-employed Californians can open a CalSavers account voluntarily. The application is straightforward and there are no employer fees. If you have irregular income and want a simple, low-friction way to set aside money for retirement without much administrative overhead, CalSavers gets the job done. The investment options are limited - a small menu of index funds and a capital preservation fund - but for someone just starting out, that simplicity is a feature, not a bug.
The Roth structure means contributions go in after tax, so qualified withdrawals in retirement are tax-free at the federal level. California, unlike most states, does tax Roth IRA withdrawals under some circumstances - something worth confirming with the California Franchise Tax Board or a tax professional, since it's a quirk that catches people off guard.
What a Solo 401(k) Offers That CalSavers Doesn't
A solo 401(k) - sometimes called an individual 401(k) or self-employed 401(k) - is available to self-employed people with no full-time employees other than a spouse. It's offered through financial institutions like Fidelity, Vanguard, and Schwab, not through the state.
The contribution limits are substantially higher than a Roth IRA. For 2025, the IRS allows total contributions of up to $70,000 per year (or $77,500 if you're 50 or older), combining your contributions as both "employee" and "employer." Check IRS Publication 560 or irs.gov for the current figures, since these adjust annually. For a higher-earning freelancer or independent contractor in California, that gap in contribution room can translate to a significant tax deferral over time.
A traditional solo 401(k) lets you deduct contributions from your federal and California state taxable income now, which matters a lot in a high-cost, high-tax state. California's income tax rates are among the highest in the country, so reducing your current-year taxable income through pre-tax retirement contributions has a more pronounced effect here than it would in, say, Texas or Nevada. Some solo 401(k) plans also allow a Roth option, giving you flexibility to mix and match depending on your income in a given year.
The tradeoff is administrative complexity. You'll need to open the account, manage investments yourself, and file an IRS Form 5500-EZ once your account balance crosses a certain threshold. It's not onerous, but it's more than clicking through a CalSavers enrollment form.
The California Cost-of-Living Factor
Retirement planning in California carries specific pressures that workers in other states don't face to the same degree. Median home values in many California metros are well above the national average, which means your housing costs in retirement - whether you're carrying a mortgage, renting, or paying property taxes - will likely be higher than national projections assume. Social Security benefits are calculated on lifetime earnings and aren't adjusted for regional cost of living, so a Californian collecting the same benefit as someone in a lower-cost state has meaningfully less purchasing power.
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That context matters when you're choosing between CalSavers' annual limit and a solo 401(k)'s much higher ceiling. If you're a California freelancer earning enough to max out a solo 401(k), deferring taxes at California's higher marginal rates while building a larger retirement balance is generally worth the extra administrative step - though your specific situation depends on income, deductions, and retirement timeline.
How to Actually Get Started
For CalSavers, self-employed workers can register directly at calsavers.com. You'll set your contribution amount and choose from the available investment options. There's no minimum contribution required to open the account.
For a solo 401(k), start by confirming you meet the IRS eligibility rules: you need self-employment income and no full-time employees other than a spouse. Most major brokerages offer solo 401(k) plans at no annual cost, though investment options and features vary. You generally need to open the account before December 31 of the tax year you want to begin contributions, though you may have until your tax filing deadline to make the actual contributions - confirm this timeline with your brokerage and the IRS's current guidance, since rules around deadlines can shift.
Neither account type requires you to contribute in years when your income is low, which makes both options workable for the variable-income reality of gig and freelance work.
This is general information, not legal or financial advice - check calsavers.com, irs.gov, and the California Franchise Tax Board at ftb.ca.gov for guidance on your specific situation.