Market Overview

How To Save For Retirement When You're Self-Employed

Share:

Working for yourself is the dream, isn’t it? Forecasts indicate 42 million people will make the jump by 2020. You set your own hours, have no one to answer to but yourself, and get to drive your career at your own pace.

That’s the positive side, anyway. The truth is a lot more challenging.

Working for yourself takes a lot of discipline. There’s no one to tell you “You have to start now.” No one to manage expenses. And most of all, no one to help you save for retirement. How do you save for retirement when you’re self-employed? Here are some steps to take.

Make Sure There’s Money to Save

One of the hardest things about working for yourself is managing your finances successfully. It’s easy to put every dime “into the business,” but not all investments actually give you the return you need. And it’s easy to buy every course and go to every conference without ever making a dollar from it.

If you’re going to work for yourself, one of the most important things you’ll do is manage your cash flow. When you do this successfully, you’ll live below your means and have money left over from your business to invest in your retirement.

Pick the Right Retirement Account

While an IRA makes sense, low annual contribution limits mean that it will be hard to save enough for retirement with that alone. Instead, consider a solo 401(k). You’ll have a lot of options regarding what you invest your money in, although it takes some paperwork to set up.

If you have employees, or you plan to hire some, you’ll need a different option. A SIMPLE IRA or SEP IRA will be better choices if you have employees. Remember that a generous retirement plan can make it easier to attract and keep top talent!

Stay Consistent

Saving for retirement is a long-term endeavor, and it’s important to stay consistent. It can be easy to let immediate needs—for bills or the business—take funds from your savings plan.

Unfortunately, that causes you to not only miss out on the contribution itself, but all the growth that money would have brought you over the next decades.

Remember, when it comes to retirement, wisdom tomorrow doesn’t hold a candle to wisdom today. Don’t skip savings deposits. Your future self will thank you!

Start Right Away

Are you young and excited about everything you can do with your business? Great! Don’t skip your retirement plan, though. Today is the day to start.

Do you feel like you’re already behind the 8-ball and there’s no way you can save enough? Start anyway! Having some retirement savings is far, far better than having none.

You may tell yourself, “I’ll retire when I die.” While that makes a nice party joke, it’s not a reality. Many people face issues with work and health that prevent us from being gainfully employed after a certain age.

Be ready, start saving now! 

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsEntrepreneurship Personal Finance General

 

Related Articles

View Comments and Join the Discussion!

What's In Store For Radius Health In Q1 Earnings?

Cognizant Drops on Low Guidance, But Market Cycles Point Higher