Down Debt

Saving for your future self while being independent

Cecile Corral felt optimistic about her retirement savings. For a decade, she made good use of an employer-sponsored 401(k), contributing 6% of her salary and receiving matching up to 6%. Before having children, she had saved almost 10% of her salary.

“My retirement savings plan was basically on autopilot, and I didn’t care,” said Corral, 48, who lives in Miami.

It came to an abrupt end in May 2020. A victim of the pandemic, she was fired after 20 years as editor-in-chief of a family of specialist magazines. It was a shock to his system – and his finances.

“I had to make sure our bills were paid and that my husband and two children had health insurance,” Corral said.

Corral’s husband had been a freelance documentary film producer for 10 years, and the family had health insurance through his employer. Housekeeping was suddenly taken over by two freelancers instead of one.

Soon, Corral began offering freelance PR and marketing services. But with new expenses for the family and their business, and no paycheck, retirement savings had to be cut short.

“Even though I had time before I retired, I was worried,” Corral said. “I knew I had to find a way to start saving for retirement again.”

Saving for retirement as a freelancer is very different than it is as an employee, said Ben Henry-Moreland of Freelance Financial Planning, an independent financial planning firm specializing in working with the self-employed.

“The biggest barrier to saving for retirement as a freelancer is the fact that you have to take the initiative,” he said. “You have to put money aside, figure out what kind of retirement vehicles you want to use, and then you have to find one or more providers.”

In addition to having income that can fluctuate from month to month, “freelancers have additional expenses that employees don’t,” said Lazetta Rainey Braxton, co-CEO of 2050 Wealth Partners, a fee-based financial planning and wealth management company. These include the 15.3% self-employment tax on your net earnings – which covers social security and health insurance contributions – as well as health insurance costs and other types of benefits. Operational expenses such as website hosting and marketing are more important.

Backup Preparation

If you’re starting to make a living as a freelancer, there are ways to organize your finances so you can save. But first, make sure you have an emergency cash fund.

“Before you even start saving for retirement, set aside six months of living expenses and three months of business expenses,” Braxton said.

After that, figure out a percentage you want to contribute to your retirement savings and find a way to automate it.

“I use a modified version of the system detailed in the book ‘Profit First’,” said Julie Cunningham, from Hendersonville, North Carolina, dietitian and freelance writer.

Cunningham, 49, uses three business bank accounts – for operating expenses, for taxes and for a reserve account for his business – in addition to his personal bank account. She also uses the Wave accounting app, which is free, to track her business expenses.

“Every two weeks I enter my gross income into a Google Sheet, which is already set up to calculate 50% of my gross income to pay me, with 15% of my gross income going to taxes, 5% to go to a reserve account and 30% to go to my company’s operating expense account,” Cunningham said. She then takes some of the money she paid herself and transfers it to an Individual Workers Retirement Account. self-employed known as SEP-IRA, ending up with 10% of her gross as retirement savings, she said.

Savings and investment vehicles

Once you have a retirement savings system or plan, you will need to create one or more retirement accounts where your money can live and grow.

Below are the top four retirement savings options for the self-employed, according to Atiya Brown, CPA and president of Savvy Accountant, a full-service virtual accounting firm. “It’s important to invest the dollars you save for retirement instead of keeping it all in cash,” she said.

— The SEP-IRA, or individual retirement account of the Simplified Employee Retirement Scheme. Although available to businesses of all sizes, SEPs can be used by the self-employed and have contribution limits that change from year to year. In 2022, workers using this type of IRA can contribute up to 25% of net income (after expenses), or $61,000, Henry-Moreland said.

After a year of freelance work, Corral was able to start saving money in a SEP-IRA again. “Once I landed clients, the consistent monthly income helped me feel comfortable setting aside 10% of my gross income for retirement,” she said. She transferred her old 401(k) to a SEP-IRA at TD Ameritrade. (As for health insurance, she was able to get a policy through the Affordable Care Act, but with higher deductibles and copayments than at her old job.)

The Solo 401(k). “My favorite retirement savings option is the Solo 401(k),” said Holly Larson, 55, a business and technology writer in Durham, North Carolina, who has been freelance for more than 20 years. “In 2022, I can contribute up to $67,500, and you can contribute up to $61,000 if you’re under 50,” she said. “It’s money that the US government will allow you to deduct from your income, which is an amazing way to save for retirement and reduce taxes.”

The health savings accountor HSA. As a self-employed person, you may have to pay for your health insurance. If you have a high-deductible health insurance plan (defined by the IRS as one with an annual deductible of at least $1,400 per individual and $2,800 per family), you can open an HSA.

“The benefit of an HSA is the ability to set aside money with pre-tax dollars,” Brown said. “Although the funds can be used to pay out-of-pocket medical expenses, including deductibles, you can choose to keep the funds in your HSA and use them as an investment vehicle.”

In 2022, the contribution limit for an individual is $3,650 and for a family it is $7,300. If you are 55 or older, you can make an additional $1,000 catch-up contribution. At age 65, these account holders can withdraw money from an HSA for any reason, not just for medical expenses. Distributions for eligible medical expenses are not taxed, but other withdrawals are taxable.

IRA Roth. “If you still have money to set aside for retirement after contributing to other retirement vehicles and you’re reaching income caps, consider funding a Roth IRA,” Brown said. The maximum after-tax dollar contribution is $6,000 per year, with an additional $1,000 catch-up contribution if you are over age 50. This money can be withdrawn tax-free after age 59.5 if the account has been open for more than five years.

Larson also maximizes his Roth IRA contributions each year. “Even though they’re after-tax and non-deductible, they’re valuable because you save tax at the end of the transaction,” she said.


Planning for retirement can be difficult, especially when you have competing goals, like paying off debt or saving for a child’s college education. But there are plenty of resources that also offer helpful financial advice for retirement, especially online communities.

For example, Larson belongs to various Facebook groups focused on financial independence, including ChooseFI, Women’s Personal Finance (Women on FIRE), and Taxes in Retirement. She also combs through blogs and sites such as Financial Samurai, Get Rich Slowly, Mr. Money Mustache, and ESI Money’s Millionaire Interviews. She enjoys podcasts such as ChooseFI and Afford Anything.

She thanks them for helping her discover and maximize tax-efficient investments and use the savings tools.

When it’s time to start investing, you can do it yourself or consult a financial professional.

If you’re considering a financial advisor, ask if the team of advisors has experience with freelancers or sole proprietorships. Larson suggested asking for an example from an independent client, how he created that person’s retirement investment accounts, and what his recommendations are for tax-optimized investing for your situation.

“It will let you know if they are familiar with independent retirement investing,” she said. Fees are also important. Seek to pay less than 1% of assets.

Even with all the challenges of saving for retirement, some freelancers are optimistic about their prospects.

“Business is booming. It’s great to be a freelance technology writer right now, due to the incredible demand from companies and agencies,” Larson said. “As a result, I can do work that I really love and saving more aggressively for retirement is the best of both worlds.