Ways to Save for Retirement as a Freelancer

Self-employment doesn't mean you stop planning for the future.

Retirement accounts are powerful financial tools that allow you to save for the future and cut your taxes at the same time. They’re brilliant. But if you work for yourself, or don’t have a traditional day job with a 401k, you might think it’s impossible to save for retirement.

The good news is that whether you’re self-employed as a full-time freelancer (like me), or if you dabble in a part-time business on the side, there are plenty of options to save for retirement. Depending on your work and financial situation, you may qualify for several different types of retirement accounts all at once.

Even if you have irregular income as a freelancer or small business owner, it’s important to get in the habit of saving for retirement on a regular basis as early as possible. The more accounts you use, the bigger your nest egg can be for retirement.

Here are three ways I save for retirement without having a 9-to-5 job.

1. Traditional IRA

IRA stands for Individual Retirement Arrangement, which means it’s a plan for individuals only. Contributions you make to a “traditional” retirement account are tax-deductible, which reduce the amount of tax you owe.

For instance, if you earn $50,000 and contribute $5,500 to a traditional IRA, you’re taxed on $44,500 of income only, not on $50,000. Plus, none of your investment gains in a traditional IRA are taxed until you take withdrawals in retirement.

Who Can Use It

Anyone with earned income under age 70 1/2, including the self-employed, minors and non-working spouses who file taxes jointly.


You can save for retirement and cut your taxes in the current year.


If you (or a spouse) participate in a retirement plan at work, such as 401k or 403b, some or all your traditional IRA contributions may not be tax deductible. Also, taking withdrawals before age 59 1/2 triggers income tax, plus a 10 percent early withdrawal penalty.

2018 Maximum Contribution

You can contribute up to $5,500 (or $6,500, if you’re age 50 or older) if you earned that much during the tax year.

More on Saving for Retirement: How Much You Need to Survive Retirement in Your State

2. Roth IRA

A Roth IRA is subject to the same rules that apply to a traditional IRA, except when it comes to taxes. Contributions to a Roth IRA are taxed up front, but withdrawals made during retirement are completely tax-free.

Who Can Use It

Anyone with earned income, including the self-employed, minors and non-working spouses who file taxes jointly.


You avoid tax on years or decades of earnings in the account. Additionally, you can withdraw original contributions (but not earnings) before retirement without triggering tax or a 10 percent early withdrawal penalty.


If you exceed an annual income threshold, you don’t qualify to make new contributions. However, you balance continues to grow tax-free, which is a fantastic benefit. In years when my income is too high to contribute to a Roth IRA, I make contributions to other tax-advantaged accounts instead.

2018 Maximum Contribution

You can contribute up to $5,500, or $6,500 if you’re age 50 or older. This is the total sum limit for any and all contributions toward IRAs. For example, you could contribute $2,000 to a traditional IRA and $3,500 to a Roth IRA in the same year, but not $5,500 to both IRAs.

Learn: Which Is Right for You?: Traditional or Roth IRA


A SEP-IRA, or Simplified Employee Pension IRA, is my favorite retirement account for the self-employed because it truly is simple to administer and has a high annual contribution limit. You make contributions for yourself and your employees if you have any.

Who Can Use It

Anyone who is self-employed (with or without employees), no matter if you’re set up as a sole proprietor, a partnership or a corporation.


You can make contributions in years when business is good and skip them when money is tight. You can also have a SEP-IRA in addition to other retirement accounts, such as a traditional or Roth IRA.


If you have employees, you must contribute an equal percentage of income to their accounts. Just like with a traditional IRA, when you tap funds in a SEP-IRA before age 59 1/2, you’re subject to income tax, plus an additional 10 percent early withdrawal penalty.

2018 Maximum Contribution

You can make contributions for each of your employees (including yourself) up to 25 percent of each employee’s compensation for a maximum amount of $55,000.

These are the retirement plans that I use, but they aren’t a complete list. Check out IRS Publication 590, Individual Retirement Arrangements and Publication 560, Retirement Plans for Small Business on IRS.gov to explore more options to save for retirement.

For more clarification about the pros and cons of different retirement accounts, download the Retirement Account Comparison Chart (PDF), a handy reference tool that explains the rules on one page.

If you need help setting up a retirement plan or using multiple accounts, paying a tax professional to help maximize benefits for your business and retirement accounts can pay off.

Click through to read more about 10 signs you’re not saving enough for retirement.

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