Retirement Savings Tips for Freelancers Without a Steady Paycheck

retirement savings tips

As a freelancer without a steady paycheck, planning for retirement can seem daunting. But with some strategic saving and investing, you can grow your nest egg over time. This article provides actionable tips to help freelancers of all income levels save for the future. You’ll learn how to prioritize retirement savings goals, make the most of gig economy benefits, and take advantage of tax-advantaged accounts.

With the right preparation, freelancers can build financial security. Read on to find smart strategies to save for retirement even with an irregular income stream. By implementing these tips, you can confidently plan for your ideal retirement.

Start Saving for Retirement Early

As a freelancer without a steady paycheck, putting money aside for retirement can seem challenging. However, starting to save early is one of the best ways to ensure financial security later in life. The power of compound interest means the earlier you begin saving, the less you need to put away each month to meet your goals.

Take advantage of any employer matching

If you have a side gig that offers any sort of retirement plan with matching, contribute at least enough to get any available matching funds. That’s free money that can really help your nest egg grow over time.

Open an IRA

If you don’t have access to any employer-sponsored plans, open an individual retirement account or IRA. Traditional IRAs allow tax-deductible contributions while Roth IRAs offer tax-free withdrawals in retirement. Contribute as much as you can each year, aiming for at least enough to get the maximum IRS limits.

Consider annuities

Annuities are tax-advantaged retirement products offered by insurance companies. They come in a variety of types, including fixed and variable annuities. Annuities allow your money to grow tax-deferred and can provide lifetime income in retirement. They do charge fees, so compare options carefully.

The road to retirement may be longer for freelancers, but with discipline and time, you can get there. Starting to save early and taking advantage of the options available to you are the first and most important steps to securing your financial future. Keep putting one foot in front of the other, increase your contributions whenever possible, and don’t get discouraged. Your future self will thank you.

Open a Solo 401(k) or SEP IRA

As a freelancer, you do not have access to an employer-sponsored retirement plan. However, you still have options to save for retirement. Two of the most popular retirement account options for self-employed individuals and freelancers are the Solo 401(k) and Simplified Employee Pension IRA (SEP IRA).

Solo 401(k)

A Solo 401(k) allows you to contribute as both the employee and employer. For 2020, you can contribute up to $19,500 as an employee, plus up to 25% of your net earnings from self-employment as an employer, up to a total of $57,000. The Solo 401(k) offers more flexibility as you can borrow money from the account and you can start withdrawing money penalty-free once you turn 59 1⁄2.


A SEP IRA also allows tax-deductible employer contributions of up to 25% of your net self-employment income, up to $57,000 for 2020. However, you cannot make employee contributions to a SEP IRA. While SEP IRAs typically have lower fees compared to most 401(k) plans, you cannot borrow money from a SEP IRA and withdrawals before age 59 1⁄2 may be subject to a 10% penalty.

As a freelancer, saving enough for retirement can be challenging without a company match. A Solo 401(k) or SEP IRA can help you maximize your retirement contributions each year. Evaluate both options based on your needs and goals to choose the right tax-advantaged account for your retirement savings. With consistent and disciplined contributions over time, you can build a sizeable nest egg to fund your retirement.

Contribute to a Roth IRA

As a freelancer, contributing to a Roth IRA can be an important part of your retirement savings strategy. A Roth IRA allows your contributions to grow tax-free and allows tax-free withdrawals in retirement.

Contribution Limits

For 2021, you can contribute up to $6,000 per year to a Roth IRA if you’re under age 50. Those 50 and older can contribute up to $7,000. You can contribute the full amount for 2021 as long as your earned income for the year is at least $6,000 ($7,000 if 50 or older).

No Required Minimum Distributions

Unlike traditional IRAs, Roth IRAs do not require you to take minimum distributions (RMDs) once you turn 72. This means you can let your money grow tax-free for as long as you like.

Withdrawals Are Tax-Free

As long as you’ve had your Roth IRA for at least five years and you’re at least 591⁄2, withdrawals you take from your contributions and earnings are tax-free. This can provide tax-free income in retirement.

Consider a Roth IRA Conversion

If you have money in a traditional IRA, you may want to consider converting some or all of it to a Roth IRA. You’ll have to pay taxes on the amount converted, but then the money can grow tax-free and qualify for tax-free withdrawals in retirement. A Roth conversion may make sense in years when your income and tax rate are lower.

As a freelancer, a Roth IRA should be a key part of your retirement savings strategy. Contribute as much as you can each year and take advantage of the tax benefits Roths provide. Let your money grow as long as possible to maximize the tax-free income in retirement. With some planning, a Roth IRA can help ensure your hard-earned money lasts well into your retirement years.

retirement savings tips

Use a Health Savings Account (HSA)

As a freelancer, you typically do not have access to an employer-sponsored retirement plan like a 401(k). However, you can take advantage of a Health Savings Account (HSA) to save for retirement. An HSA allows you to contribute money on a pre-tax basis to pay for qualified medical expenses.

Contribution limits

For 2021, the annual contribution limit for an individual with self-only HDHP coverage is $3,600. The limit for family coverage is $7,200. Individuals age 55 and older can contribute an additional $1,000. Contributions are tax-deductible, and any interest or investment earnings accumulate tax-deferred.

Using HSA funds

You can withdraw HSA funds tax-free to pay for qualified medical expenses like health insurance premiums, prescription drugs, dental and vision care. However, if you withdraw funds for non-medical expenses before age 65, you’ll pay income taxes and a 20% penalty on the amount withdrawn.

Investing HSA funds

Many HSAs allow you to invest a portion of your balance in mutual funds and ETFs. This allows your money to potentially grow at a faster rate than a standard savings account. The sooner you start contributing and investing in your HSA, the more it can benefit you in retirement.

HSA as a retirement account

After age 65, you can withdraw HSA funds for any purpose without penalty, although regular income taxes will apply. If you don’t need the funds for medical expenses, an HSA essentially acts as an individual retirement account (IRA). The account balance can remain invested, and required minimum distributions (RMD) are not required until after the account owner’s death.

For freelancers and the self-employed, an HSA provides an easy, tax-advantaged way to save for retirement medical expenses and general retirement income. Contributing and investing in an HSA as early as possible can significantly impact your retirement savings and financial security. An HSA, combined with an IRA like a Roth or SEP IRA, creates a diversified approach to retirement planning for those without access to traditional employer plans.

Invest in Real Estate

Buy Investment Property

As a freelancer, one of the best ways to invest for retirement is to purchase income-generating real estate. Rental property can provide passive income that is not directly tied to your freelancing work. Look for properties in areas with strong rental demand and a stable housing market. Factor in expenses like taxes, insurance, maintenance, and vacancies to ensure the rent will cover costs and generate a profit.

Consider REITs

If direct property ownership is too hands-on, consider investing in real estate investment trusts or REITs. REITs invest in real estate and commercial real estate mortgages. They trade on major exchanges and offer the liquidity of stocks with the diversification of real estate. REITs are required to pay out at least 90% of their taxable income as dividends to shareholders. These regular dividends can provide freelancers with a steady income stream for retirement.

Explore Crowdfunding

Real estate crowdfunding is a newer option for freelancers to invest in property for retirement. Websites like Fundrise and RealtyMogul allow you to invest in commercial real estate projects. You can invest as little as $500 in opportunities that were previously only open to institutional investors. The projects are typically apartment buildings, office buildings, storage facilities, and retail centers. Investors earn income from rent payments and the potential appreciation of the underlying property.

Consider a Self-Directed IRA

For freelancers who want to take control of their retirement funds, a self-directed IRA (SDIRA) allows you to invest in alternative assets like real estate. An SDIRA follows the same rules as a traditional IRA but allows non-traditional investments. You can use funds in an SDIRA to invest in rental property, REITs, tax liens, private placements, and more. An SDIRA provides tax advantages while enabling freelancers to build wealth through real estate investments.

Real estate provides freelancers several options to generate retirement income outside of the stock market. With direct property ownership, REITs, real estate crowdfunding, or an SDIRA, freelancers can diversify their retirement funds and invest for the long-term. Real estate investments offer the potential for solid returns to help ensure your financial security after your freelancing days are over.

Build an Emergency Fund First

As a freelancer, building an emergency fund should be your top financial priority. Without the security of a steady paycheck, an emergency fund provides a financial cushion in case of unexpected expenses or a temporary loss of income.

Aim for 3-6 Months of Expenses

Experts recommend saving enough to cover 3 to 6 months of essential expenses like housing, food, and transportation. This may take time to build up, so start by saving at least $500 to $1000, then add to it each month. Keep these funds in a savings account for easy access.

Cut Expenses and Increase Income

Look for ways to cut your budget by reducing or eliminating discretionary spending on dining out, entertainment, and hobbies. You should also explore ways to generate additional income through side gigs, freelance work, or a part-time job. The more you can add to your emergency fund each month, the faster it will grow.

Don’t Tap it for Non-Essentials

Once you have an emergency fund established, do not withdraw money from it for non-essential purchases. It should only be used in the event of true financial emergencies like medical bills, job loss, or other unforeseen circumstances that threaten your ability to pay for basic necessities. Replenish the fund as quickly as possible after any withdrawals to ensure you have a financial safety net in place for future emergencies.

Building an emergency fund requires discipline but provides critical protection for freelancers without the security of a steady paycheck. Make establishing an emergency fund a top priority, then you can focus on other retirement and financial goals with the peace of mind that you have a financial cushion to fall back on if needed. Staying debt-free, keeping expenses low, and having multiple income streams will help ensure your success as an independent freelancer or contractor.

Automate Your Savings

Automating your retirement savings contributions is one of the most effective ways to build your nest egg as a freelancer. When your income fluctuates from month to month, it can be difficult to make consistent contributions to your retirement accounts. By setting up automatic transfers, you ensure that savings happen before other expenses.

Contribute at Least Enough to Get Any Match

If your freelance work offers any matching contributions to a retirement account like a 401(k), make that contribution amount your minimum savings target each month. Contributing at least enough to get any available match is the best way to take advantage of that free money and boost your retirement savings. For example, if your employer matches up to 3% of your income, set up an automatic transfer of at least 3% of your income each month.

Increase Contributions When Possible

When you have surplus income in a given month, increase your retirement contributions accordingly. For example, if you normally contribute 10% of your income each month but earned 20% more income than expected, increase your contribution to 12% of your income for that month. Take advantage of higher-earning months to make catch-up contributions to stay on track with your annual retirement savings goals.

Open an IRA for Additional Tax-Advantaged Savings

In addition to any workplace retirement accounts, open an individual retirement account or IRA. Contribute any amount up to the annual contribution limit, which is $6,000 for individuals under 50 and $7,000 for those 50 and older in 2021. An IRA provides additional tax-advantaged savings space and more investment options. Set up automatic monthly contributions to your IRA to ensure consistent savings over time.

Following these tips to automate your retirement savings as a freelancer can help ensure you continue making progress toward your financial goals even when your income is uneven. Consistency is key, so start automating your contributions today to take the worry out of saving for your future.

retirement savings tips

Consider Getting Disability Insurance

As an independent freelancer or gig worker, purchasing disability insurance is an important step to protect your financial security. Without a steady paycheck, you are solely responsible for funding your own short-term and long-term disability coverage.

Disability insurance replaces a portion of your income if you become ill or injured and are unable to work. Short-term policies provide coverage for a limited period, such as 3 to 12 months. Long-term policies provide coverage for years or until retirement age. The premiums and coverage amounts will depend on factors like your age, health, occupation, and the waiting period you select.

When evaluating disability insurance policies, review the definition of disability carefully. Look for a “true own-occupation” definition that will provide coverage if you cannot perform the essential duties of your own occupation. Policies with more restrictive definitions may not provide coverage if you are still able to work in another occupation.

Compare the percentage of income replacement, waiting periods, benefit periods, and premium rates from multiple insurers. A longer waiting period before receiving benefits can lower premium costs but means you need to have enough emergency funds saved to cover expenses during that period.

Disability insurance is especially important for freelancers because you do not have access to group disability policies or paid time off benefits that many traditional employees receive. By purchasing an individual disability insurance policy, you can gain peace of mind that your income and livelihood will be protected in the event of illness or injury.

While the premium costs may seem high, the financial consequences of not having coverage could be far more devastating. With prudent financial planning, disability insurance can help ensure your retirement savings and financial goals remain intact.

Though freelancing has many benefits, it also brings additional risks and responsibilities. Taking steps to safeguard your income and plan for unexpected events will help establish financial security in your self-employed career. Disability insurance should be a key component of your financial strategy as an independent worker.

Retirement Savings Tips FAQs for Freelancers

As a freelancer without a steady paycheck, saving for retirement can be challenging. However, it is crucial to start as early as possible to allow your money to compound over time. Here are some tips to get you started:

Do you have an emergency fund? Before contributing to retirement, build up 3-6 months of expenses in an emergency fund. This provides a financial cushion in case of income disruption. Once established, focus on retirement savings.

What retirement accounts should you use? The most common options for freelancers are the Solo 401(k) and SEP IRA. Both allow tax-advantaged saving and higher contribution limits than a traditional IRA. Consider opening one and start contributing as much as possible.

How much should you save? Most experts recommend saving at least 10-15% of your income for retirement. As a freelancer, aim for the higher end of this range due to income variability. Increase your contribution rate whenever possible.

Does retirement saving make sense with fluctuating income? Yes, the power of compounding returns means that any amount you can contribute will benefit you greatly over time. Start with whatever you can and look for ways to increase it. Some options include:

• Setting a fixed monthly or quarterly contribution from your business account. This helps make saving a habit and priority.

• Increasing rates whenever you land a large contract or new steady client.

• Contributing excess or “bonus” earnings from a successful month or quarter.

• Reducing expenses to free up more money for retirement contributions. Even small lifestyle changes can make a big difference.

• Taking advantage of catch-up contributions if over age 50. This allows for higher annual contribution limits.

Though saving for retirement as a freelancer presents challenges, it is possible with discipline and perseverance. Start today with whatever you can, look for ways to increase it over time, stay invested for the long run, and your future self will thank you. Consistency is key. Keep at it and don’t get discouraged. Your freelancing career and retirement security will both benefit as a result.


As a freelancer, retirement savings can seem daunting without the structure of a steady paycheck. However, with some planning and discipline, you can take control of your financial future. Automate deposits into an IRA or solo 401k. Build an emergency fund so you aren’t tempted to raid retirement savings.

Explore alternate income streams to supplement freelance work. Invest wisely and minimize fees. Though it requires effort, with smart strategies you can save for the retirement you envision. The key is making savings an essential line item, not an afterthought. You alone control your financial destiny. Through purposeful planning and execution, a secure retirement is within your grasp.