Retirement Tips for Self-Employed Workers

Retirement Tips for Self-Employed Workers

There are pros and cons to being self-employed. We get to manage our schedules, do what we love, and never have to submit vacation time for approval. The cons are equally important to pay attention to.

Oftentimes as self-employed we miss out on some benefits like health care and a retirement plan. They are not included in our work but that doesn’t mean self-employed workers cannot obtain these types of benefits.

With just a few tips, self-employed workers can have a retirement plan as robust as a corporate job. Here are a few retirement tips for self-employed workers.

Tip: Work as Long as You Can!

This is why it is so important to do work you love. Working as long as you can not only increase your savings but provide you with a higher social security and retirement plan payout once you do retire.

With every month you work and the paycheck you earn, you are contributing a little towards your future income. Consider the tips below and find that continuing to work as little as 3 additional years could reward you with hundreds of more dollars every month. 

Tip: Delay Social Security Payments Until The Age of 70.

As we mentioned above, working as long as you can helps your savings, social security payments, and retirement plan. Retiring at the age of 70 can give you the greatest social security payout as illustrated below.

Let’s assume when you retire you make $50,000 per year. Depending on when you retire you can expect the following social security payouts.

Early retirement (age 62) $1,133 per month
Full retirement (age 67) $1,727 per month
Delayed retirement (age 70) $2,215 per month

As you can see from the chart above, delaying your retirement can have financial benefits allowing you to live more comfortably later on. 

In this chart, it is important to note how delaying social security 3 more years could reward you with $500 per month. This does not necessarily mean you need to work those 3 years, but if you can put yourself in a financial position where that income is not needed, you will benefit. 

There are many ways to set yourself up for a social security payout at 70. One of those ways is with a retirement plan.

Tip: Set up a Retirement Plan!

Just because you are self-employed does not mean you need to miss out on retirement plans. There are plenty of options that make it possible for workers at any stage of their career to begin putting aside money for retirement.

Self-employed workers can choose from the following retirement plans:

  • Traditional or Roth IRA
  • 401(k)

Each self-employed worker’s situation is different. This is why it is important to dig into the details of how each plan would affect your business. There is a plan for every type of business so the only task you as the self-employed worker has is to decide which is best for you.

If you are interested in learning more about retirement plans, consider checking out one of our recent articles, How to Begin Offering Retirement Benefits to Your Employees. This article does focus on what plans are best for employers but it can also be useful for self-employed workers wanting to learn a bit about their 4 options.  

Tip: Contribute to Your Plan Regularly

This last tip is all about executing your plan. You may have an idea of what you want to do but keeping to the plan is what will ensure a comfortable retirement. 

If you were to save $1,000 per month for 25 years at an 8% return, you will have $957,366. The sooner you start, the better but this is a plan you could begin at 45 to recover by 70. 

Paired with your retirement plan, you should also consider your social security payments. Let’s say at 70 you begin pulling from social security. You can expect a payout of $26,580 annually. At this point you also begin pulling 5% from your retirement plan to live off of, resulting in $45,741. 

When combined, you can expect an annual salary of $72,321. 

This can be a very comfortable way to retire.

If you are self-employed it can be difficult often solving problems by yourself or trying to troubleshoot issues in your business. One thing you should not have to worry about is your personal financial health. Self-employed workers have flexibility when it comes to their benefit options which can sometimes provide them with more security than a traditional 9-5.

To learn more about how you can begin setting up your business for retirement consider downloading the Truly Profit Plan. In this plan, we detail how you can budget to ensure money is consistently going into your pocket and retirement plan. 


[Download the truly profit plan]