Retirement Planning for Self-Employed and Freelancers

In many cases, retirement planning for independent workers and freelancers is not a passive process like it is with regular employees. Unlike employees who use their employer’s sponsored retirement plans or payroll deductions, self-employed personnel have to develop their retirement savings plans on their own. McCone County Federal Credit Union is to serve independent workers and ensure their financial stability. Here are some important things that freelancers and self-employed people should take into account and retirement choices.

  1. Set Your Retirement Objectives

The first step of retirement planning is to identify your financial objective. Consider the kind of life you want to lead when you retire and make a projection of how much you will require to set aside. In a typical case, it is advised that one should be able to save enough to earn 70-80% of the income he or she used to earn before retiring.

A few more are the living costs, the costs of healthcare and inflation that are important when calculating the retirement costs. This way you will know how much you should save and which retirement accounts will suit you best in achieving your goal.

  1. Start a Solo 401(k) for High Contribution Limits

A Solo 401(k) or an Individual 401(k) is ideal for the self-employed with no employees apart from a spouse. Solo 401(k) plans offer high contribution limits, allowing you to contribute as both an employee and an employer:

  • Employee Contribution: 

You can make up to $22,500 in 2024 ($30,000 if you’re aged 50 or older).

  • Employer Contribution: 

Besides your employee contribution, you can contribute up to 25% of your net earnings as the employer.

Combined, you can contribute up to $66,000 per year in 2024 or $73,500 per year if you are 50 or older. Due to this high contribution limit, Solo 401(k) plans are perfect for those who wish to save a lot of money for retirement. Also, you can choose to have a Roth Solo 401(k) where contribution is made after tax, hence growing tax free.

  1. Consider a Simplified Employee Pension (SEP) IRA

A SEP IRA is a popular retirement plan for self-employed individuals and small business owners. This type of account is easy to set up and offers generous contribution limits, making it an appealing choice for freelancers and entrepreneurs. With a SEP IRA, you can contribute up to 25% of your net income, up to a maximum of $66,000 in 2024.

SEP IRAs are also flexible, allowing you to vary your contributions each year based on your income and business expenses. This flexibility can be beneficial for self-employed workers whose income fluctuates.

  1. Look Into a SIMPLE IRA for Lower-Cost Retirement Planning

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is another retirement option, especially suited for self-employed individuals with one or more employees. While the contribution limits for SIMPLE IRAs are lower than those of Solo 401(k)s or SEP IRAs, they still provide a tax-advantaged way to save for retirement.

In 2024, the contribution limit for a SIMPLE IRA is $15,500, with a $3,500 catch-up contribution allowed for those aged 50 and older. SIMPLE IRAs are easy to manage, with low administrative costs, and offer an employer match, which can be a useful feature if you plan to expand your business in the future.

  1. Contribute to a Roth or Traditional IRA for Additional Flexibility

In addition to employer-sponsored retirement accounts like SEP IRAs or Solo 401(k)s, self-employed individuals can also open a traditional or Roth IRA. These accounts provide flexibility and allow you to save on taxes, with a contribution limit of $6,500 in 2024 (or $7,500 if you’re over 50).

  • Traditional IRA: 

Contributions to a traditional IRA may be tax-deductible, which can reduce your taxable income for the year. However, withdrawals during retirement are taxed as ordinary income.

  • Roth IRA: 

Contributions to a Roth IRA are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. This can be advantageous if you expect to be in a higher tax bracket during retirement.

If you’re already maximizing contributions to a Solo 401(k) or SEP IRA, opening an IRA can provide an additional retirement savings avenue.

  1. Automate Contributions to Stay on Track

One of the major disadvantages of being a freelancer is that their income is irregular and therefore they cannot save regularly. But on the other hand, there is an option to automate the process of your contributions to retirement, so you won’t miss your goals. Put money from your business or personal account into your retirement account on a monthly or quarterly basis. Automating means that retirement savings become a routine process and progress can be ongoing even during the most active seasons.

  1. Think about Health Savings Accounts (HSAs) for Healthcare costs.

Medical expenses are one of the biggest expenses in retirement, and getting ready for these expenses in advance can help avoid overspending. If you are eligible for a high-deductible health plan (HDHP), you should open a Health Savings Account (HSA). Donations are tax exempted, income generated is tax free, and the amount withdrawn to pay for qualified medical expenses is tax free.

Unlike the FSA, the money in the HSA is not used up annually, which makes it a good way to save for medical expenses in the post-work years. If the HSA is funded after age 65, one can use the money for non-medical expenses, but will be taxed on the withdrawal.

  1. Regularly Review and Adjust Your Retirement Plan

Retirement planning is not a one-time task. It’s essential to review your retirement accounts, goals, and investment strategy regularly. As your income and business grow, consider increasing your retirement contributions. Additionally, periodically reassess your asset allocation and make adjustments as needed to stay track with financial objectives.


Partner with McCone County Federal Credit Union for  Secure Retirement


As a self-employed person, it may be difficult to plan for retirement but with the right strategies, you can prepare for your retirement. McCone County Federal Credit Union is here to help freelancers, business people and small business owners to achieve their retirement dreams. Whether you have a traditional IRA, Roth IRA, rollover IRA or a self-directed IRA, we are dedicated to offering you the best advice, online resources to help you plan for your retirementю

Reach out to McCone County Federal Credit Union today to learn more about retirement options and start planning for a secure, comfortable future.