Saving for Retirement : A Guide for the Self Employed
If you’re doing any kind of job with an inconsistent income, dude, that’s rad. You’ve made it past the hard part of taking a chance away from the reliability of a consistent paycheck and dove head first into the world of managing an unpredictable amount of money. WOOHOO! I commend you, that’s no easy task. I’m hopeful it’s crossed your mind that all your long-term savings are now dependent on how you plan but if it hasn’t…I’m here to remind you, PRIORITIZE SAVING. It will make everything easier, allowing you to stress less and enjoy more.
You’re in charge, that includes your future
When you start working for yourself it can be easy to focus on the now and let long term savings slip on your priority list. You have big stuff going on trying to keep a business thriving and sometimes it seems easier to just put yourself last but I promise putting your future first will make you a happier, healthier business owner.
A good place to start is a budget. If you haven’t already written yourself a budget click here and learn all about budgeting an inconsistent income! It’ll help you plan month-to-month and make long term saving a breeze.
SEP IRA, ROTH IRA, etc.
You’ve probably heard the term 401(k) tied to retirement conversation quite often but may not be familiar with what that exactly means. A 401(k) is an employer-sponsored retirement plan funded with pre-tax dollars, often companies will even match employee contribution. When going on your own you no longer have the benefit of a company retirement plan like this but you do have a much wider range of options that’s not available to those working a normal 9-5! I’ll breakdown the options I choose to take advantage of in my current retirement plan.
IRA and Roth IRA: IRA contributions are tax deductible and are not taxed until withdrawn. Whereas, Roth IRA contributions are made post-tax, making withdrawals in retirement tax free. I personally choose to contribute to a Roth IRA but everyone is a little different! I’ve linked an article all about the pros and cons here, read up to learn what would work best for you!
SEP IRA: A Simplified Employee Pension (SEP-IRA) is a great way for lots of self employed individuals to save. There isn’t a company size minimum requirement, and you can contribute up to 25% of your income or $54,000 annually (whichever comes first).
Never be afraid to ask for help
If reading about these types of accounts has you stressing about how the heck you even set all this up, I recommend reaching out to organizations that specialize in finding what’s best for you! There are all kinds of brokerages out there to help you get through it. I recommend looking into The Vanguard Group, Fidelity Investments and Charles Schwab Corporation and finding the best fit for your goals!
Make it automatic
Once you’ve decided what kind of account you want (you can even have multiple!), it’s time to start saving. I’ve found that even if I tell myself I’ll save a certain amount, I’m not that reliable to transfer it myself. The best thing I’ve ever done for my savings goals is to turn on my automatic investments.
Look at the numbers you settled on when you budgeted and create a weekly or monthly withdraw from your account that goes straight into your retirement! It’s okay to start small, $20 a week is $1040 a year, but definitely try to challenge yourself. The more you put aside now the longer it has to grow.
Hi! I'm Jo.
I want to live in a world where anyone, anywhere can pursue and do what they love. A place where people are financially healthy and happy. My contribution to this dream? This little place on the internet.