Beyond the Gig: How to Plan for Retirement as a Freelancer

As a freelancer, you get to be your own boss, set your own hours, and choose your clients. But this independence comes with a unique set of responsibilities, and one of the most critical is planning for your retirement. Unlike a traditional employee, you don't have an employer-sponsored 401(k) to automatically funnel your savings. This means you need a proactive, disciplined strategy to secure your financial future.

The good news is that plenty of powerful retirement options are available to self-employed individuals. By understanding your choices and making a plan, you can build a comfortable nest egg, just like your conventionally employed peers.

Start with a strong foundation: IRAs

For many freelancers, especially those just starting out or working on the side, an Individual Retirement Account (IRA) is the perfect place to begin. They are easy to set up and offer significant tax advantages.

• Traditional IRA: Contributions to a Traditional IRA are often tax-deductible, which lowers your taxable income in the present. The money grows tax-deferred, and you pay income tax on your withdrawals in retirement. This can be a great option if you expect to be in a lower tax bracket during retirement than you are now.

• Roth IRA: A Roth IRA is funded with after-tax dollars, so your contributions aren't deductible today. The major benefit is that your money grows tax-free, and qualified withdrawals in retirement are also tax-free. This is often the better choice if you expect to be in a higher tax bracket later in life.

Level up your savings: Consider a SEP or Solo 401(k)

Once you're consistently earning more from your freelance business, you can level up your savings with a plan that offers higher contribution limits than a standard IRA.

• Simplified Employee Pension (SEP) IRA: A SEP IRA is easy to set up and allows for very high annual contributions. In 2025, you can contribute up to 25% of your net self-employment earnings, with a maximum limit of $70,000. It offers flexibility, as you don't have to contribute every year, which can be useful when your income fluctuates.

• Solo 401(k): Also known as a "one-participant 401(k)," this is a powerful option for self-employed individuals with no employees (other than a spouse, if applicable). A Solo 401(k) allows you to wear two hats: as both an employee and the employer. This allows for significantly higher contributions. For 2025, you can contribute up to $23,500 as an employee, plus an additional 25% of your net self-employment income as the employer, bringing the total to potentially $70,000.

Essential retirement planning tips for freelancers

No matter which type of account you choose, here are some habits you need to build for a secure retirement:

• Start early and automate: The power of compound interest is your best friend. Start saving as early as possible, and automate your contributions to your retirement account.

• Create a budget: Your freelance income may be irregular, so it's vital to create a budget that includes a consistent portion for retirement savings. A good rule of thumb is to aim for saving 15-20% of your income for retirement.

• Build an emergency fund: Before you aggressively save for retirement, build an emergency fund of at least three to six months' worth of living expenses. This keeps you from raiding your retirement savings during a lean month.

• Stay educated: Retirement and tax laws can change. Make it a practice to stay informed about your retirement options and the associated tax implications. Don't be afraid to consult a financial advisor, especially if your financial situation is complex.

By taking control of your financial future, you can ensure that the freedom and flexibility of freelancing extend all the way into a comfortable and secure retirement.