Being self-employed brings freedom to build your own business or career path. For many, working for others just isn't an option. Of course, the downside of being the boss is the inherent responsibility to oversee every aspect of your operation seven days a week.

With the long hours and endless responsibilities, it's easy to overlook planning for retirement. These days many individuals work for themselves. Realtors, contractors, attorneys, physicians, and many more occupations are members of the self-employed club.

Start With a Written Retirement Strategy

I find many business owners put off retirement planning because they just aren't aware of the tools that are available to them. Before I talk about a specific plan, I would like to mention that one should always begin with a written retirement strategy. I generally start by modeling a client’s current income and expenses. Finding a realistic amount to contribute initially will help the client stay committed to their savings plan. Re-visiting the plan annually allows us to review the progress and decide if the contributions need to be adjusted for the following year.

An experienced planner will also be helpful when the time comes to convert from financial planning to retirement planning. This is the point when assets are needed to produce retirement income for the client.

Three Options for Self-Employed Individuals

Plan options for self-employed individuals without employees include, but are not limited to:
  • Individual 401(k) – In 2023, individuals under the age of 50 are allowed to contribute the lesser of 25% of their compensation or $22,500.

  • SEP-IRA – In 2023, individuals under the age of 50 are allowed to contribute the lesser of 25% of their compensation or $66,000.

  • Roth-IRA – In 2023, contributions are limited to $6,500 for individuals under age-50. An additional $1,000 is available for those over age 50. Roth-IRAs also have income restrictions, beginning at $138,000 for single filers and $228,000 for joint filers. For more details please email me.

Roth-IRAs offer an additional advantage as well. A Roth is unique because it allows for emergency withdrawals without penalties on contribution amounts. Some view this feature as a backup emergency fund.

The Bottom Line on Retirement

Being self-employed allows for many effective options to save for retirement. When paired with an experienced advisor, who offers unbiased individualized investment advice, realizing your retirement goals can be easier than one might think.

If you’re not currently working with an advisor, or if you’ve lost contact with your current one, let’s start a conversation. Contact me at [email protected] or by calling (615) 469-7348.

William Bevins is a Registered Investment Advisor with the SEC. Mr. Bevins began his Advising career in 1995. Today his firm, Cypress Capital located in downtown Franklin Tn, manages $400 million from Individuals, Small and Medium Size Businesses, Pensions, and Charities. Follow on Facebook.