How to Plan for Retirement as a Self-Employed Entrepreneur

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While I love being self-employed and working from home, there are some challenges associated with not working for “the man.” For most entrepreneurs, the main challenges have to do with the lack of benefits.

When you work at a more traditional job, you have access to employer-subsidized health insurance, and you have access to employer-sponsored retirement plans. As an entrepreneur? Not so much!

You won't have access to many of the benefits other workers take for granted, and retirement planning can be one of the biggest hurdles to clear.

Especially since you can't just sign up with your employer's plan (and possibly get a match) as part of your contract. You have to take care of your retirement all on your own.

Choose the Right Retirement Account for Entrepreneurs

The good news is that you can still save for retirement. Self-employed entrepreneurs may not get the “free money” that comes with an employer matching program, but they can still set money aside in tax-advantage retirement accounts.

Some of the options available to self-employed entrepreneurs include:

  • Solo 401(k)
  • “Regular” IRA (including Roth version)
  • Profit Sharing Plan

You have a lot on your mind as an entrepreneur, what with running a business, increasing revenue and handling the daily tasks. However, you don't want to neglect your future. Open a tax-advantaged retirement account, and start putting money away today.

Determine How Much Money You Need to Save

Just as you would in any retirement planning situation, you need to look ahead to figure out how much you should be setting aside. The reality for many entrepreneurs is that it may not be possible to set aside a large amount of money each month since so much of your capital is going toward getting started and running your business.

Use one of the many retirement calculators available online to determine how much you need to set aside now to improve your chances of retiring the way you want later. The important thing is to start setting something aside right now — the earlier you start the better.

Increase Retirement Contributions as Your Business Grows

However, it is common for entrepreneurs to put a little less aside as their businesses are getting started, and the increase the amount set aside over time. This has been the case for me. I started out putting aside a relatively small amount aside each month, but as my business has grown, I've been able to contribute more to my retirement account.

Look ahead to when you will need the money, and figure out what you hope to accomplish with it. Then, as you earn more over time, you can begin to increase the amount that you set aside.

Make it automatic so you don't have to think about it, and have less of a chance of missing any savings. My retirement account contributions are taken out of my checking account each month. As my business improves over time, I can increase the automatic withdrawals.

Take Your Lifestyle Into Consideration

Retirement planning isn't just about the money. Many self-employed entrepreneurs aren't interested in just sitting still during retirement.

A recent study from the Institute of Economic Affairs indicates that retirement can be bad for your health — especially your mental and emotional health — as you lose motivation in your life to do something interesting that you enjoy.

As you plan your retirement, make sure you have something worthwhile to replace your enterprise, whether it's staying involved with your business in some capacity, taking up a new hobby, or traveling the world.

Be sure to take the lifestyle and business you're trying to create into account when planning your retirement future.

Miranda Marquit

Miranda is a journalistically trained freelance writer and professional blogger specializing in personal finance. Her work has appeared and been mentioned, in various media, online and off. You can follow Miranda on: Twitter

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  1. Self employed folks love control. Try to focus more attention on the Roth IRA for that reason. Try to use the other qualified retirement plans as a bridge to an ever expanding Roth IRA. When Anton Ivanov mentions that he is responsible for his retirement, I agree. I just want as much of his retirement as possible to be tax free.

  2. If you’re successful enough as an entrepreneur, you don’t need to plan for retirement. You just retire whenever you want.

  3. As usual education is key. Didn’t know so many options were available. When you work for the man you go 401k and IRA. Now i have several options that I never knew about. Thanks for the information. Savings is def important whether working for the man or self employed.

  4. Definitely something to consider for entrepreneurs. I’ve never relied on corporate or government benefits when planning for my retirement, so switching to running my business full time didn’t significantly affect my plans. I just know that I am responsible for providing for my own retirement, which makes me work even harder.

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