Member Sign In

Thirteen percent. According to data from The Pew Charitable Trusts, that's the shockingly low number of self-employed individuals in a single-person business who contribute to a retirement plan.

Thirteen percent.

Now compare that to 72%. That's the percentage of employees in larger companies who actively save for retirement — likely without even lifting a finger, thanks to automated payroll systems.

Let that sink in for a minute.

If you're self-employed, you might be thinking, "Well, sure, of course they're saving! Someone else is doing all the heavy lifting for them!" But when you're running your own show, it's all on you. Every dollar saved, every tax deduction, every contribution — it's your responsibility. It can be downright overwhelming.

You've got irregular income, clients to chase, bills to pay — and don't forget about the actual work you have to get done. Now you're supposed to be in charge of your own retirement plan too?

But here's the thing: Retirement isn't just for people who have a cushy HR department setting everything up. It's for you too.

In this article, we're going to break down the biggest hurdles that keep self-employed folks from saving for retirement — and more importantly, how to overcome them.

Let's get started!

Hurdle 1 — Lack of Employer-Sponsored Plans

Being your own boss is great — until you realize there's no company nudging you to save for retirement. No employer-sponsored 401(k)? No automatic payroll deductions? No match?

No problem.

You've got options.

Solo 401(k): This is your own personal 401(k) for your one-person business. You can contribute as both the employee and the employer. This lets you put away more money — up to $69,000 for 2024, depending on your income. Not bad, right?

SEP IRA: Simple and straightforward, the SEP IRA lets you contribute up to 25% of your net earnings (with a cap at $69,000 for 2024). If you have employees, you'll need to contribute to their accounts too. But for a solo operation, it's flexible and effective.

SIMPLE IRA: Easier to set up and manage, the SIMPLE IRA allows for contributions up to $16,000 for 2024 ($19,500 if you're over 50). While the limits are lower than the SEP or Solo 401(k), it offers a simple way to save without too much hassle.

Traditional IRA/Roth IRA: Traditional IRAs offer tax-deferred growth, while Roth IRAs provide tax-free withdrawals in retirement. Contribution limits are lower — $7,000 for 2024 ($8,000 if you're over 50) — but both options are valuable for additional savings.

Don't let the lack of an employer plan hold you back. You're the boss — retirement plan included.

Hurdle 2 — Dealing with Fluctuating Cash Flow

Okay, so you've got your retirement account set up. Now comes the tricky part — actually putting money into it. If you're like most self-employed folks, you're likely dealing with a fluctuating cash flow. One month you're flush with cash; the next, things slow down.

Sound familiar?

This is where a lot of people get stuck. How do you save for the future when you don't know what tomorrow's going to look like?

But don't worry — like I always say, personal finance works best when it's not “one size fits all.” There are strategies for all kinds of scenarios, like how to keep your retirement savings on track, even when your cash flow feels like a wild ride. Here are some of my favorites:

Flexible Contributions: Instead of contributing a fixed dollar amount each month, commit to saving a percentage of your income. This way, when you earn more, you save more; when things are tight, you scale back. This strategy helps you get in the habit of contributing something to your retirement every month — exactly the mindset you want to have.

Automate Savings: Automating your retirement contributions isn't just for people with a W-2. Use apps or banking tools that let you set up automatic transfers based on income or specific triggers. For example, some apps allow you to automatically transfer a percentage of each payment you receive directly into your retirement account.

Take Advantage of High-Income Months: When cash flow is strong, consider front-loading your retirement contributions. If you have the flexibility to do so, you can even max out your IRA or Solo 401(k) early in the year. Then you can get through the lean months without the stress of playing catch-up later.

Maintain an Emergency Fund: It's not directly about retirement but having a solid emergency fund can ease the pressure when income dips, allowing you to stay consistent with your retirement savings. If you know you've got a cushion, you're less likely to skip out on retirement contributions during the lean months. It's your safety net so you can keep moving forward.

Remember, the key isn't perfection — it's consistency. Even if you're not hitting the same number every month, you're still building your retirement, one contribution at a time. And that's what really matters.

Hurdle 3 — Staying Consistent with Contributions

Let's be honest — when you're busy running a business, saving for retirement can easily slip to the back burner.

But remember what I just said about consistency? It's the key to your long-term success.

This hurdle is all about staying on track, even when life gets hectic. Here are some habits that will help you stay consistent.

Automate, Automate, Automate: If you haven't already, set up those automatic contributions. This is how so many people working at larger companies manage to save for retirement; it's all done automatically through payroll so they don't have to think about it. But you can take advantage of this strategy as well. Even small, regular contributions add up over time.

Treat It Like a Bill: Treat your retirement contribution like a bill you have to pay — just like rent or utilities. If you wouldn't skip paying your electric bill, don't skip paying into your retirement.

Track Your Progress: Keep tabs on your retirement account balance. Watch it grow. There's nothing like seeing those numbers climb to remind you that your efforts are paying off — literally. Plus, tracking your progress makes it feel more real and motivates you to stay consistent.

Use the Snowball Effect: Even small amounts grow over time thanks to compound interest. A dollar today is worth a lot more than a dollar tomorrow — so keep throwing those dollars in, even when it feels tough. Over time, your contributions will pick up momentum, like a snowball rolling downhill.

Building a habit of consistent contributions will help you stay on track, no matter how busy life gets. A little here, a little there — it all adds up.

Hurdle 4 — Maximizing Tax Advantages

Still not convinced saving for retirement is worth the hassle? Turns out saving for the future can also help you make the most of your money today.

When you're self-employed, the tax advantages built into retirement accounts are one of the smartest ways to keep more money in your pocket. If you aren't making the most of these benefits, you could be missing out on some serious savings — not just in your retirement, but right now.

Tax-Deductible Contributions: Contributing to accounts like the Solo 401(k) or SEP IRA lowers your taxable income for the year, which can make a big difference during tax season. If you're having a strong income year, these deductions can significantly lower your tax bill.

Roth IRA Advantages: The Roth IRA operates differently. You pay taxes upfront on your contributions, but once that money is in, it grows tax-free. And when it's time to withdraw in retirement, you don't owe any taxes. If you expect your tax rate to be higher later in life, the Roth IRA could be a smart choice.

Catch-Up Contributions: If you're 50 or older, you can take advantage of catch-up contributions. This allows you to contribute more than the usual annual limit, giving you a chance to accelerate your savings in the years leading up to retirement.

Every tax advantage you use strengthens your financial position and helps ensure a more secure retirement.

Hurdle 5 — Planning for the Future Amid Uncertainty

Unfortunately, retirement planning isn't something you do once and forget about. It requires regular reassessment, especially when you're self-employed and your circumstances can change quickly.

Maybe your business takes off and your income doubles. Maybe you decide to take on employees, or perhaps life throws an unexpected curveball your way. Whatever the case, your retirement plan should evolve along with you.

Check In Regularly: Make it a habit to review your retirement plan at least once a year. Are your contributions still on track? Has your income changed? Have your retirement goals evolved?

Adjust Contributions: As your income fluctuates, so should your contributions. If business is booming, increase your contributions to take advantage of the higher income. If things slow down, it's okay to reduce contributions temporarily — but try to contribute something. The key is flexibility.

Refine Your Strategy: As your business and personal life evolve, it's also a good idea to reassess which retirement accounts make the most sense for you. A SEP IRA might have worked well when you were solo, but now that you have employees, another option might suit you better. Make sure your strategy reflects where you are today, not where you were when you started.

Retirement planning for the self-employed is all about flexibility. The more you stay involved and adjust as needed, the better prepared you'll be for whatever the future holds.

Thirteen Percent

That's the number we started with, but it's a number that doesn't have to include you.

You're self-employed, which means you're used to figuring things out on your own. So why not take that same mindset to your retirement?

The tools are there, the plans are laid out — now it's just about taking the next step. So go ahead, pick one of the hurdles we laid out today and tackle it this week. Open that account. Automate a small contribution. Make a move that will put you on the path to a secure retirement.

Thirteen percent? You're aiming higher.