Save for Retirement

How to Save for Retirement When You’re Self-Employed

As someone who has been self-employed for a little over two years there is quite a bit I have learned. However, the thing I continue to come back to is that no one is going to do anything for me, meaning it’s all up to me. That ranges from finding the work and knowing what expenses we should take on to things like retirement. You see, I don’t have the cushy benefit of having someone give me free money for retirement leaving me on my own to handle it. That said, I think I’ll take the benefits of working for myself if it means managing my own retirement. :-)

Don’t Use Fluctuating Income as an Excuse

If you work for yourself, or even have a side gig then you know just how much income can fluctuate. This month may be record breaking, but next month could be a stinker. As someone who has been there, don’t use that as an excuse not to save for retirement. I know it can be difficult, but don’t give into it. The biggest reason is that time will get away from you easily and you’ll lose out on time in the market.

What we do is set a minimum amount we’re going to put away for retirement each month. We’ve been self-employed long enough to have a feel of what we’ll average so we budget around that. The beauty is that you’re still forcing yourself to save for retirement and when you have good months you can put away more money – double win in my book!

Look at Your Options

Since you’re not working in a traditional workplace that means that a company sponsored 401k is likely not an option for you. There are, however, numerous option for you to use, in addition to a Traditional or Roth IRA. Those options are:

  • Solo 401k
  • SEP IRA
  • SIMPLE IRA

Each of these options has their own pros and cons and you’ll want to make sure you speak with a tax professional to see which is right for you. With that being said, most of the options allow you to put a sizable amount away each year which can benefit your retirement planning quite a bit.

Funnel Your Retirement Money

Another option to setting a minimum amount you’re going to put away each month is to funnel a specific revenue stream towards your retirement. My wife and I do this and it works out great for us. If you have multiple streams of income or services you offer this is a good option to consider as you can then direct everything you make from that one area entirely to retirement. Think of it as mental accounting. I have found that this drives me to succeed with this stream even more because I can put a picture with where it is going to and what it’s going to accomplish for us. It’s not fool proof, but it can be a great way to get you motivated to save more for retirement.

 

If you’re self-employed, how do you balance that and saving for retirement? What challenges have you faced with it?

 

Image by Lending Memo / Flickr

Comments

  1. says

    I am not self employed yet, but I hope to one day be able to do blogging full time. I haven’t thought too much into the retirement portion of being self employed but I remember doing research into it when I was a personal trainer and working alone.

  2. says

    I use a solo 401k because it meets my needs. As for actually investing my self employed income, I make it a point to invest a certain percent, every month. It’s almost like paying yourself first when you receive a paycheck from an employer. Instead of an auto transfer to my savings account, I just send the check to Schwab for my 401k.