If you’re self-employed and asking how to build a retirement plan when you’re self-employed, you’re not alone — and you’re smart to think about it now. When I went freelance full-time, one of my biggest fears wasn’t finding clients — it was what would happen decades later when I wanted to stop working.
Unlike traditional employees, we don’t have a company 401(k) match or HR department to guide us. But here’s the good news: you have more control — and some powerful options — to build a solid retirement plan on your terms.
This guide breaks down exactly how I, and many other freelancers, build retirement security step by step — even with an unpredictable income.
Why Retirement Planning Is So Critical When You’re Self-Employed
When you’re your own boss, no one’s saving for you. If you don’t plan, there’s no pension, no employer match — just what you set aside.
Learning how to build a retirement plan when you’re self-employed is about building habits, choosing the right accounts, and protecting your future self while still investing in your business and paying your bills today.
Step 1: Know How Much You Need
Most freelancers never run the numbers. I didn’t for years — because it was scary.
Here’s the simple math:
- A good rule of thumb is to save enough to replace 70–80% of your pre-retirement income each year for 20–30 years.
- Use free calculators (like NerdWallet or Vanguard) to estimate your target number.
- The earlier you start, the smaller the monthly savings need to be.
Step 2: Choose the Right Retirement Accounts
Self-employed workers have great options — often better than what many employers offer.
✅ Traditional or Roth IRA — Good starter account for everyone, with tax advantages. 2024 contribution limit: $7,000/year (plus $1,000 catch-up if you’re 50+).
✅ SEP IRA — Simple and flexible for freelancers and small business owners. Contribute up to 25% of net income (max $69,000 for 2024).
✅ Solo 401(k) — For sole proprietors with no employees (except a spouse). Combines employee and employer contributions — up to $69,000 total for 2024 if you earn enough.
Each has pros and cons — pick one that matches your income and how much you can save.
Step 3: Automate Contributions (Even if They’re Small)
When your income fluctuates, it’s easy to put retirement on the back burner.
When I started freelancing, I automated a small transfer — just $50 a week — into my IRA. Some months were tight, but consistency made it stick.
If income varies wildly, save more during good months to balance the lean ones.
Step 4: Don’t Forget Taxes
Freelancers don’t have taxes automatically withheld. I made this mistake my first year: I didn’t budget for taxes or retirement, so I ended up paying more in taxes and saving nothing.
Your retirement contributions can help lower your taxable income — but only if you plan ahead. Talk to an accountant or use software to estimate quarterly taxes and retirement deductions.
Step 5: Keep Fees Low
High fees eat your retirement returns. That’s why I stick with simple, low-cost index funds and ETFs inside my accounts.
✅ Diversify across stocks and bonds.
✅ Avoid funds with high expense ratios.
✅ Rebalance once a year — don’t try to time the market.
Step 6: Protect Your Income and Savings
Your retirement plan only works if your business stays healthy.
- Build an emergency fund (3–6 months of living expenses).
- Consider disability insurance — one injury or illness can wipe out savings fast.
- Keep personal and business finances separate for clear budgeting.
Step 7: Revisit Your Plan Every Year
Life and income change. Each year, I do a “retirement checkup”:
✅ Did my income go up or down?
✅ Can I increase my contributions?
✅ Is my asset allocation still right for my age and goals?
Mistakes I Made (So You Don’t Have To)
❌ Waiting too long — I thought I’d save “when my income was higher.” Start small now.
❌ Not automating — it’s too easy to skip.
❌ Not budgeting for taxes — retirement savings help, but only if you actually set aside money!
❌ Chasing hot stocks — slow, steady index funds worked better for me long-term.
Real Example: My Freelance Retirement Setup
When I first went freelance:
- Income: ~$60,000/year
- Account: Solo 401(k)
- Contribution: 15% of net income ($9,000)
- Automated: $750/month, adjusted quarterly
- Invested: 80% in index funds, 20% in bonds
Ten years later, my savings have grown way more than I thought possible — and I still have flexibility to invest in my business too.
FAQs
1. What’s the best retirement plan for self-employed people?
A Solo 401(k) or SEP IRA is best for higher incomes; a Roth or Traditional IRA is a great start for everyone.
2. How much should I save?
Aim for 15–20% of net income if possible. Start smaller if you have to — consistency beats perfection.
3. What if my income is unpredictable?
Save a percentage instead of a fixed amount. Put more aside when you have a strong month.
4. Can I contribute to more than one plan?
Yes! Many freelancers use a Solo 401(k) or SEP plus a Roth IRA if they qualify.
Final Thoughts: Freedom Comes from Planning Ahead
Learning how to build a retirement plan when you’re self-employed might feel overwhelming at first. But your future self will thank you for every dollar you set aside today.
Start small. Automate it. Protect your income. And remember — you’re your own boss, so you get to design not just your work life but your retirement life, too.