What are the best ways to save for retirement as a self-employed entrepreneur?

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As a self-employed entrepreneur, you have the freedom and flexibility to pursue your passion and create value for your audience. But you also face some unique challenges when it comes to saving for retirement. Unlike traditional employees, you don't have access to employer-sponsored retirement plans, matching contributions, or automatic deductions. You have to take charge of your own retirement planning and make smart decisions that suit your goals and lifestyle. In this article, we'll share some of the best ways to save for retirement as a self-employed entrepreneur in the creator economy.

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Wynand Gouws CFP? Author To Hundred and Beyond

CERTIFIED FINANCIAL PLANNER?
Hugh Hacking, CFA

Executive Structured Investments and Annuities at Momentum Corporate

1 Choose a retirement account

As a self-employed entrepreneur, one of the first steps to saving for retirement is to choose a retirement account that works for you. Depending on your income, expenses, and tax situation, there are several options available. A Solo 401(k) allows you to contribute as both an employer and an employee, up to $58,000 in 2021. Additionally, a SEP IRA allows you to contribute up to 25% of your net self-employment income. A SIMPLE IRA is ideal for small businesses with fewer than 100 employees and allows you to contribute up to $13,500 in 2021 as an employee plus a 3% match as an employer. Lastly, Traditional or Roth IRAs allow you to contribute up to $6,000 or $7,000 if you're 50 or older. With a Traditional IRA contribution being tax-deductible and Roth IRA contributions being tax-free in retirement, these are the most basic types of IRAs that can be opened with any financial institution and invested in a variety of assets.

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Wynand Gouws CFP? Author To Hundred and Beyond

CERTIFIED FINANCIAL PLANNER?
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Three basic principles will provide a sound Foundation. 1. Use a tax incentivised investment vehicle. The tax incentive provides a guaranteed return. This may also be protected against creditors, great for entrepreneurs ! 2. Invest for growth. If possible invest as much in equities or a balanced portfolio with equities and bonds. This should be invested in a global mandate ! 3. Invest 10 to 20 percent of net earnings and let it grow over time. Let compounding work.

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MILAGROS DICK MCARTHUR

FUNDER, REINSURER, GUARANTEE ASSURANCE Provider, COLLATERAL PROVIDER
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Retirement should be a welcome stage in any professional seeking to have their own business and open their options to a diversified entrepreneurial platforms or choose a multisectoral communities where your own platform or programme can be accepted. NGO WORK and ADVOCACY AND actuarial arrangements are sometimes the most welcome in govt projects. IT depends on the retiree... Follow your passion...

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Josh Manier

Fractional CFO & Tax Advisor, Real Estate Fund Manager
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A roth 401K is also an option from some employers for deferred employee compensation (wages). There typically are no max income limits for these unlike roth IRA's.

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E.Charles Morganweck,III

Relationship management/ Human asset supporter/Retirement benefits professional/LION...LETS ROAR!!
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The earlier you start the better. start when you have your first job...even part time job you can invest a small portion and build a habit of saving ...but first give to others and keep giving even when things go sideways.. and they will and when things go good, invest a little more. Being willing to scale back in lean times but also being able to turn the savings spigot back on when things loosen up- not forgetting to save is also key.

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2 Invest wisely

When it comes to investing your money in a retirement account, there are several things to consider. Diversifying your portfolio by spreading your money across different asset classes, such as stocks, bonds, real estate, commodities, and cash is key. Additionally, choosing low-cost funds like index funds or exchange-traded funds (ETFs) can help reduce fees and expenses. Rebalancing your portfolio periodically is also important in order to maintain your desired asset allocation and risk level. Lastly, automating your investing system by transferring money from your bank account to your retirement account can help you save time and money while taking advantage of compound interest.

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Hugh Hacking, CFA

Executive Structured Investments and Annuities at Momentum Corporate
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A key investment objective in earlier years should be to choose a portfolio that is likely to outperform inflation by 4 to 5% per annum. This allows real growth of the retirement portfolio over time. As retirement approaches it may be prudent to scale back on the portfolio volatility but achieving returns above inflation should remain a key consideration.

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3 Save more

As a self-employed entrepreneur, saving more of your income and reducing your expenses is another way to save for retirement. Doing so can help you reach your retirement goals faster and be prepared for unexpected events or emergencies. To save more, you should track your income and expenses, cut unnecessary costs, and increase your income. Keeping a record of your money flow can help you budget and identify opportunities to save. Additionally, eliminating or reducing any non-essential expenses can free up more money for retirement savings. Finally, increasing your income by creating more products or services, expanding your market, raising prices or fees, or adding passive income streams can help you boost your retirement savings and enjoy a higher standard of living.

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Hugh Hacking, CFA

Executive Structured Investments and Annuities at Momentum Corporate
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A good simple rule of thumb is to save 15% of pre-tax earnings per annum towards retirement from an early age. More is better but this basic rule will ensure a reasonable income replacement at retirement.

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4 Plan for taxes

As a self-employed entrepreneur, one of the biggest challenges of saving for retirement is planning for taxes. Not only do you have to pay both income and self-employment taxes on your earnings, but also quarterly estimated taxes. Furthermore, you must consider the tax implications of your retirement account contributions and withdrawals. To plan for taxes, you should deduct your business expenses, as this can help reduce your taxable income and tax bill. Additionally, contributing to a tax-advantaged retirement account can provide tax benefits now or in the future. Lastly, consulting a qualified tax professional can help you understand your tax situation, optimize your tax strategy, and avoid mistakes or penalties.

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Josh Manier

Fractional CFO & Tax Advisor, Real Estate Fund Manager
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One thing that we've found helpful for our self employed clients especially over the years is helping strategize multiple means for back up liquidity on both the personal and business balance sheet. This helps eliminate financial stress and provide a forward looking growth oriented view versus being overly financial conservative for a "rainy day". The mindset of the later often has investors miss out on 6 and even 7 figure opportunity costs over the course of a few decades.

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5 Review your plan

The final step to saving for retirement as a self-employed entrepreneur is to review your plan regularly and make adjustments as needed. Your retirement plan should not be static, but rather a dynamic process that evolves with your goals, income, expenses, and market conditions. It is important to check your progress to ensure that you are on track to meet your retirement goals and update your goals based on your changing needs and expectations. Additionally, you must be able to adapt to changes in your personal, professional, or financial situation. Although saving for retirement can be challenging, it is possible with the right guidance and support. By following these steps, you can take control of your retirement planning and create a plan that works for you.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Josh Manier

Fractional CFO & Tax Advisor, Real Estate Fund Manager
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Find a competent, detailed, independent CFO/tax advisor to help both you, your business and your family maximize your comfort level, increase your net worth and cashflow, while minimizing the tax bill which includes using all the tax brackets in the family. Keep in mind the lowest tax bracket is actually zero.

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What are the best ways to save for retirement as a self-employed entrepreneur?

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1 Choose a retirement account

2 Invest wisely

3 Save more

4 Plan for taxes

5 Review your plan

6 Here’s what else to consider

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