Retirement For The Self-Employed: How To Plan

Retirement For The Self-Employed

If you’re one of the tens of millions of Americans who are self-employed, we’ve got good news: It’s possible to plan for your golden years. Retirement for the self-employed is doable, it just requires a bit of planning ahead.
According to a report released by the Transamerica Center for Retirement Studies (TCRS) and the Aegon Center for Longevity and Retirement (ACLR), approximately 70% of the self-employed workers they surveyed expect a flexible transition to retirement–instead of waking up and quitting work, they expect to ease into retirement over a number of years.

Retirement For The Self-Employed: The Basics

Whether you own a small business with employees or work as a full-time freelancer, there are many different options for retirement planning to choose.

While employees at full-time jobs often have employer-sponsored retirement plans like 401(k)s, the self-employed have to plan a bit more.

Being self-employed means you have to find and implement your own retirement plan, and–unfortunately–there’s no employer contribution matching to boost your retirement savings.

Worryingly, the Transamerica/Aegon report finds that only a third of their respondents consider themselves to be “habitual savers.” Self-employed workers who have employees–like small business owners–are much more likely to be habitual savers.

If you’re self-employed, saving for retirement has two main parts: Choosing a retirement plan and making sure to start putting money away today.

Retirement For The Self-Employed: Options

Self-employed entrepreneurs have several options for retirement saving–traditional IRAs, Roth IRAs, and SEPs.

Traditional IRAs and Roth IRAs are retirement savings plans with a number of tax benefits. SEPs are Simplified Employee Pensions that are designed especially for business owners. When the self-employed set up SEPs, they have a program that creates pensions both for them and any other employees they might have.

One of the best ways to get started understanding your options is to speak with a broker or another financial expert to learn what works best for your circumstances. Almost Millions cannot give advice and highly recommends you speak to a reputable financial professional before making any decisions.

Self-employed workers can also set up individual or solo 401(k)s for themselves and their spouses. Individual and solo 401(k)s let the self-employed contribute up to $18,000 per year or $24,000 if over the age of 50. Additional money can be deposited in the 401(k) each year as an “employer” contribution.

However, if you have a 401(k) from a full-time or part-time employer outside of your self-employed work, this may effect the amount you can deposit inside your 401(k). Ask an accountant for more information.

Meanwhile, if you’re looking for an easy way to start saving for retirement, Almost Millions recommends depositing an extra $15 a day in a bank account for retirement. Easy! And a good start.

Retirement For The Self-Employed: Other Resources

Going Solo – America’s Best-Kept Retirement Secret for the Self-Employed: What Financial Institutions Won’t Tell You About Saving for Retirement (Adam Bergman)

The Business Owner’s Guide to Financial Freedom: What Wall Street Isn’t Telling You (Mark J. Kohler & Randall A Luebke)

Retirement Preparations In A New Age Of Self-Employment (AEGON)

For Self-Employed Workers, Retirement Is Flexible (ThinkAdvisor)