Why the Self-Employed Plan for Retirement Differently

At My Millennial Guide, we strive to help you make financial decisions with confidence. To do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations. Our opinions are our own.

Read just about any guide on retirement, savings, and estate planning and you will get a lot in the way of 401ks, but little information on action plans for the self-employed. Most people today are gainfully employed by small and large businesses alike. They enjoy perks such as pensions and 401k matching.

At the same time, the ranks of the self-employed, independent worker are rising. In fact, An estimated 30-40% of today’s workforce are self-employed either part or full-time. These individuals have to plan for their retirement all on their own, and they also need to do things just a tad differently.

Self-Employed Workers Do Everything on Their Own

Some people have retirement plans that have been building up ever since they graduated high school or college and then landed their first jobs. Of course, being active about and interested in your future will help you to have the best financial outcome. People are told to save money to buy houses and even for a rainy day, but as you already know, not everyone listens.millennial entrepreneurs

Want free money?

  • Aspiration: Want to get spotted a $150 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $150 just for opening a new debit card. There’s no catch. This bank account is legit and only takes two minutes to sign up for an account.

The point of all this is to highlight that anyone who is self-employed is required to do all retirement planning independently. There are no forms that automatically get sent to their homes each year, no human resources departments for them to consult with.  

Taxes and Retirement Planning

When you are calculating how much comes out of your paycheck to fund your retirement plan, you probably don’t have to figure out how much in estimated taxes you need to send to the government each quarter. The reality is that the self-employed don’t have anything automatically coming out of their wages. They have to account for overhead operational costs so that they can stay in business for themselves. They are required to pay their own Social Security taxes and expenditure that employers traditionally cover.

student entrepreneurs
Student entrepreneurs are much more likely to be found in the café than the bar

So, in essence, the self-employed need to be able to look at retirement planning in a way that won’t lead them to financial ruin. A person just going into business for themselves may not be able to start funding a self-employed retirement plan account for a few years.  

Diversifying Investments to the Maximum

Planning for retirement requires people to plan for all possible variables. In addition to having a retirement account, most people looking toward retirement also take real estate holding into account. Then there’s Social Security, pensions, and surviving spousal death benefits to consider. Someone who is self-employed has to be in charge of all diversifying strategies. Since a 401k may not be available, someone who is self-employed might turn to alternative ways to invest. With a more diverse range of investments, retirement won’t just depend on a single plan.how to invest 100k

You have to do your own research and pay close attention to retirement plan options for self-employed workers. You may not be able to invest in your retirement in the same way as people that have an employer, but you can be just as financially set. Make setting up a retirement account one of the first things you do after going into the realm of self-employment if you are hoping to have a stable future.

Where to Open a Retirement Plan if You’re Self-Employed

Once you’ve decided to open the best retirement plan option for you, you’ll have to decide where to do it. Most online brokers will allow you to open the four most common account types: IRA, solo 401(k), SEP IRA and SIMPLE IRA.

The Best Investment Apps For Everyday Investors

App Rating CommissionsLearn More
robinhood logo

5.0/5 

Free$0

OPEN ACCOUNT
On Robinhood's website

M1 finance

5.0/5

Free$100

OPEN ACCOUNT
On M1 Finance's website

fundrise

5.0/5

0.15%$500

OPEN ACCOUNT
On Fundrise's website

public

5.0/5

Free$0

OPEN ACCOUNT
On Public's website

webull logo

4.9/5

Free$0

OPEN ACCOUNT
On Webull's website

Want free money?

  • SoFi Money: Want to get spotted $150 for free? Simply sign up for SoFi Money, and the free banking app will give you cash for free, you just relax while it gives you $150 just for opening a new checking account. There’s no catch, just set up direct deposit and start spending! This bank account is legit and only takes two minutes to sign up for an account.

About the author

Avatar
John Meeks
John is a freelance writer specializing in finance and entrepreneurship. He also consults clients about financial management and small business solutions.

On a similar note...

A Beginner’s Guide to Investing in Cryptocurrency

Hi there! My name is Steve from stevesincomestreams.com and I’m excited to talk with you all about investing in cryptocurrency for beginners, because who better to...

Explore More On

Do NOT follow this link or you will be banned from the site!