Four Ways the Self-Employed Can Prepare for Retirement

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Self-employment is something many Americans are striving for. It brings a lot of freedom when setting your schedule and pursuing your passion. So it’s no wonder the  number of self-employed people is rising this year . However, being self-employed also means taking on the responsibility of planning for retirement.

When you’re self-employed, retirement planning can feel like a daunting task. There are so many factors to consider, and it can be challenging to know where to start. However, the sooner you plan for retirement, the better off you’ll be. Here are four ways the self-employed can prepare for retirement:

Plan Out Your Retirement

The first step will always be to have a plan in place. Lay out when you want to retire, what age you want to be, and how much money you’ll need to support your desired lifestyle. This will give you an idea of how much you’ll need to save each month or year. If you don’t want to go through this process, consider hiring a professional. Contacting a  local retirement planning service  can help you plan out the essentials of your retirement. They can even help calculate your Social Security benefits if you use them.

Maximize Retirement Accounts

One of the most significant advantages of being self-employed is contributing more money to retirement accounts. Consider maxing out your contribution limit, as this will help ensure you save enough for retirement. There are different types of retirement accounts available for the self-employed. But here are the three that you should consider:

Solo 401 (k)

You might have heard of a traditional 401(k) offered by employers. The solo 401(k) is essentially the same thing, except it’s for self-employed people. This allows you to contribute both as an employer and employee, with a maximum contribution limit of $56,000 in 2019.


SEP IRAs allow self-employed individuals to contribute up to 25% of their net income, with a maximum contribution limit of $56,000 in 2019. It’s also easy to set up and manage compared to other retirement accounts

Simplified Employee Pension (SEP) Plan

Similar to a SEP IRA, this option allows for contributions of up to 25% of your net income or $56,000 (whichever is less) in 2019. The main difference is that this plan can cover employees, making it a good option for those with few employees.

A man stacking coins, savings concept

Save Beyond Retirement Accounts

While contributing to retirement accounts can provide tax advantages, saving beyond these accounts is essential. Consider setting up separate savings or investment accounts dedicated solely towards retirement. This will provide additional funds in case of any unexpected events. Here are four great investment options for the self-employed.

Index Funds

Index funds are  mutual funds that track a market index , such as the S&P 500. This can be a low-cost and diverse investment option for those looking to build their retirement savings.

Exchange Traded Funds (ETFs)

Like index funds, ETFs track a market index but are traded on an exchange like stocks. As a result, they often have lower fees than mutual funds and can provide diversity in your portfolio.

Individual Stocks

Investing in individual stocks can provide higher returns but carries more risk than index funds or ETFs. Therefore, conducting research before investing in any particular stock is important to ensure you have a diverse portfolio.


You can never go wrong with investing in gold. These particular assets offer various advantages. One of its main advantages is that it’s a hedge against inflation. It can also provide stability and diversity in your portfolio.

Other Sources of Income

In addition to saving and investing, you can do a few other things to prepare for retirement. One is to consider other sources of income. Here are some great sources of income for those self-employed.

Ride-sharing Services

One of the most common and popular options is driving for a ride-sharing service, such as Uber or Lyft. This can provide a steady stream of income and flexible hours.

Rent Out Your Property

Do you have an extra room or property that you aren’t using? Consider renting it out to generate additional income. This can also provide tax advantages.

Freelance Work

If your line of work allows it, consider taking on freelance projects in addition to your current self-employment gig. This can offer flexibility and the potential for higher pay than traditional employment.

Start a Side Business

Consider starting a side business to bring in more income. Of course, it’s essential to conduct research and create a solid plan before diving into this venture, but this could become a successful source of income during retirement.

There are many ways for the self-employed to prepare for retirement, from utilizing retirement accounts to saving and investing beyond these options. It’s important to consider what works best for you and your specific situation, but taking action now can set you up for a comfortable retirement later.

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