Saving For Retirement As A Freelancer
Saving For Retirement As A Freelancer

Whenever I speak with my fellow freelancers about money stuff, retirement comes up. All. The. Damn. Time.

And do you know what’s even more surprising than that? The sheer number of freelancers and self-employed professionals who don’t have the foggiest idea of how, exactly, they can afford retirement.

Because freelancers serve as their own HR departments (but without the fun introductory packets of papers you get at new employee orientation), that means getting good advice about planning for retirement isn’t the easiest thing. While choosing a 401k or IRA is in the hands of individual freelancers, it is a lot more manageable than you might think.

Depending on your age, how you’re planning to spend your retirement–Living in a walkable neighborhood in Brooklyn? On a beach in Costa Rica? Working part time, or living a full-on life of leisure?–your plan for a post-freelancing life, and your spending habits, your trajectory for retirement savings as a freelancer may vary considerably.

In the rest of this article, I’ll talk a bit more about the basics of freelancer retirement, list some resources, and give a broad outline of possible next steps you can take. But here’s the thing: This is for informational purposes only. I thoroughly, 110% recommend that you speak with an accountant or financial planner before making any retirement plans.

With that said, here’s a quick-and-easy 101 for retirement as a freelancer:


As the urban legend goes, Albert Einstein once said that “compound interest is the most powerful force in the universe.” Regardless or not of whether the physicist actually said that, compound interest does matter a lot–and compound interest really, really, really matters when it comes to retirement.

Retirement funds like 401(k)s and IRAs all revolve around the idea of compound interest. Compound interest basically means that the earnings and interest your investments earn are invested in more investments, which make more earnings and interest, which are invested in more investments… and so on.

Because compound interest has this snowball effect, you make more money for retirement the sooner you begin investing money in your retirement funds.

Here’s a very, very lowball example.

Say you are 25, and you start putting $100 monthly in a retirement fund with a modest 8% return rate. By the time you are 65, there will be nearly $311,000 in there thanks to the power of compound interest.

By comparison, starting the same fund at 35 only nets $136,000. That’s a big difference.

If you want to learn more, the Securities and Exchange Commission has an excellent Compound Interest Calculator.


In a perfect world, we’d all be 21 forever. But we aren’t, and retirement planning–whether you’re a freelancer or not–has to take age into account.

If you’re younger, it might make more sense to put away less money on a monthly basis if you are saving for retirement: Compound interest will make that money multiply later on. But for older freelancers, a more aggressive savings plan might may be the best bet.

Ultimately, the question of how much money to put away each month depends on how much flexibility you have, and how steady your income is.

Older freelancers are also more likely to have a head start on retirement savings thanks to 401(k)s and IRAs that accumulated during their time working for others. These accounts continue gathering interest–but it’s a smart idea to talk to a financial professional to figure out the best way to integrate your old retirement accounts into your new self-employment situation.


This is a hard one–as freelancers, many of us are constitutionally unable to think beyond next week.

However, putting some thought into your retirement plans can give you a good idea of how much money you’ll need–and if you should plan on a more aggressive retirement savings strategy or not. Will you have special health concerns you need you’ll need to address ahead of time in retirement? Are there family circumstances that will impact your retirement?

Living in big cities as a retiree, even with rent control, typically costs far more than it does in exurban or rural areas. If you’re planning on working part-time as a retiree, your costs may be lower than they otherwise would be. For North American freelancers, it might even be a smart financial idea to do what many retirees do and move to a cheaper warm-weather destination in Mexico or Central America.



Crap happens sometimes. Conventional business operators often construct an “exit plan” of next steps if they no longer want to run their own business. If you’re self-employed or a freelancer, you should also have an exit plan of your own.

In case of illness, bankruptcy, a bad business climate, or unexpected circumstances, it’s a good idea to figure out next steps if you are no longer freelancing. This includes everything from building long-term relationships with clients who could potentially offer you a job to figuring out what assets (Office equipment? Website? Automobile?) you could sell in case of financial trouble.

Your personal freelancing business is your own best asset–figuring out what to do with it if you can no longer work is something you need to do.


Ideally, at least 10% of your income should go to retirement savings each month. The important thing, no matter how little or how much money you’re making, is to keep investing at least 10% for retirement if you can.

The exact way you’re investing your money will vary according to individual circumstances or needs. Nonetheless, that doesn’t change the most important, most crucial thing: You need to save money each month.


Rollover IRAs are great for freelancers who are transitioning from full-time jobs where they had 401(k)s and IRAs through their old employers. This type of an IRA lets owners transfer over all the assets from their former’s employer’s plan in 401(k)s, 403(b)s, and 457(b)s–and lets you choose your own investments and have more control over your account.


These IRAs, which are available to everyone no matter whether they are self-employed, full-time freelancers, part-time, or full-time employees, have lower contribution limits (such as $5500 yearly if you are under 50), but offer more investment opportunities and substantially lower annual fees. Working spouses can also contribute into these IRAs on behalf of non-working spouses; the main difference is on what you can contribute: Roth IRAs accept after-tax dollars, but traditional IRAs involve pre-tax dollars.


Designed just for the self-employed, these special IRAs called SEP IRAs (Simplified Employee Pension) lets employers make tax-deductible contributions on behalf of eligible employees–which is an IRA-based plan to which employers may make tax-deductible contributions on behalf of eligible employees. In single-employee S-Corporations and single-employee LLCs, this means you can contribute to the SEP IRA on behalf of yourself. It offers certain tax deductions for plan contributions which are beneficial tax-wise for freelancers.

Writing in the Wall Street Journal, Joe Heider also recognizes a second benefit for SEP IRAs: They can help prevent freelance or side gig income from putting you into a higher tax bracket.

The downside is that SEP IRAs require employees who are eligible for participation to also set up Traditional IRAs in which to deposit SEP contributions, which is quite a bit more paperwork and a headache for many freelancers who are already cramped for time.


Solo 401(k)s, also known as self-employed 401(k)s, are similar to traditional 401(k) plans offered by full-time employers. If you open a Solo 401(k) with a broker, you can contribute up to $18,000 yearly and, in addition to that, 25% of your freelance business’s profits as well. Depending on the structure, they can be pre- or post-tax funds as well.

For older freelancers or self-employed folks, there is a secondary benefit: 401(k)s have increased maximum contribution limits if you are over fifty years old. And no matter what your age, the fact that solo 401(k)s have minimal fees is great as well.


Here’s the interesting part: Figuring out what the heck to do for retirement as a freelancer. We hope this informational guide is a good start, but your next step should be talking with an accountant or qualified financial professional about the best way to save for retirement while being self-employed.

The best choice for retirement savings depends on your age, how much money you are making as a freelancer, health concerns, how much you have saved, and a host of other factors. But this should be a good start… and saving for retirement as a freelancer doesn’t have to be scary.