I'm Self-Employed…What Can I Do to Save for Retirement?

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  • #3416

    As a small-business owner, we’re afforded a ton of benefits — like the ability to work on whatever projects we want and the flexibility to work on them from anywhere. While on one hand having these types of options are great, self-employment has a fair share of drawbacks as well.

    One of the biggest downsides that I’ve noticed since moving from the corporate world is I’m now 100% responsible for my own benefits. As far as health insurance, I’m actually okay. My wife works in finance and her job covers a good portion of our health insurance — which is GREAT!

    On the other hand, when it comes to retirement planning, I’m on my own — and that’s not a good thing.

    It was so much easier when I just had to check a box to contribute up to my employer match and, like magic, the money would be taken from my bi-weekly paycheck and invested according to my long-term goals.

    Now I have decisions to make. Tough decisions! Things like deciding between a Solo 401k or SEP IRA or both. What?!?!?!

    I’d like to think I had a pretty decent handle on my investment options as an employee, but for some reason, I’m overwhelmed with all of the options available to me as a business owner.

    Any small business owners willing to share some insight on how you decided on the right retirement option?


    I don’t have much insight, but I definitely feel your pain. I gave up my nice cushy corporate job with an employee match last year to move to a lower paying job in advertising at a small mom-and-pop shop. This year I haven’t been able to contribute to retirement since I took a $10k pay cut, but I’ll have to start working on a plan over the next few months to help me get back on track.


    I think it all depends on the return on investment. I would sit down with an expert from Vanguard or Fidelity. If you are a credit union member the guys at CUNA are pretty good too. I’ve worked with them to help me navigate my retirement funds. I hope that helps a bit.


    So great that you’re thinking about this! As a self-employed person for the last 11 years, it took me a long time to tackle my retirement plan.

    I found Vanguard’s small business site (and its comparison between the options) to be super helpful. It breaks down the advantages and the eligibility requirements for the various types in an easy chart.

    I ended up choosing the Solo 401k because it allowed me the highest contribution amount – $18,000 as an individual and then also an employer contribution* on my own behalf (more on that in a moment). This was key to helping me catch up from my hiatus from retirement investing. And, since we don’t have any employees (and my business partner is also my spouse), this option works for us. It does come with a little more administration since you are responsible for making the contributions yourself.

    *The thing about employer contributions (you, as the employer, on your own behalf) is that there’s some pretty detailed math that takes into account your net profit, self-employment taxes, etc. I found it absolutely worth it to spend the time on the calculations, because it works out that I can contribute in the neighborhood of 20% of my net income as the “employer” (and that’s in addition to my individual contribution.)

    In addition to feeling better because I’m now contributing toward my future, the tax ramifications were HUGE. I ended up eliminating one whole estimated tax payment per year! A 25% reduction in my tax liability. Yes, please!

    Good luck and let us know how it’s going?


    Another option is that you can invest in health care insurance which later will give you benefits on medical expenses after retirement.

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