According to McKinsey’s 2022 American Opportunity Survey, around 36% of the U.S. workforce—about 58 million people—now identify as independent workers, a significant increase from 27% in 2016. This growth reflects the rising appeal of self-employment, whether as a full-time career or a side hustle, as more people seek freedom and creative fulfillment. Yet with this autonomy comes financial uncertainty, especially when planning for retirement.
“Retirement planning has become a more complex endeavor for many,” notes Shawn Maloney, a retirement planning expert and the founder of Retire Wise. He adds that with irregular income and no employer-sponsored plans, “freelancers need to understand their choices, like SEP IRAs or solo 401(k)s, to build a proper retirement strategy that fits their changing financial situation.”
If you’re an independent worker, you need to be strategic about building a solid financial future. By designing a personalized savings plan and making intentional contributions, you can create a retirement foundation that supports both your lifestyle and your long-term goals.
Here are three practical steps to make it work:
1. Plan for irregular income
Freelance writer Lindsey Danis, who has been self-employed for 12 years, recalls how overwhelming starting out was, especially after constantly hearing that creative work wasn’t financially viable. “I’d been exposed to scarcity messaging around being an artist… constantly told by people that I could not make a living from my art,” she says. This mindset led Danis to believe that her work held little financial value and to accept any pay she was offered.
Once Danis committed to saving for retirement, however, she began to challenge these beliefs. “I felt like I would never have the money to pay off my loans and also save for retirement,” she says. “I was ashamed of how long I spent ignoring my student loan debt, which only got larger as interest compounded.”
But seeing that number come down was validating for Danis. “It gave me confidence,” she says. “From there, I began to move from worry and anxiety about saving for retirement to actually being excited to do so.”
For freelancers like Danis, fluctuating income is part of the job, so a plan to navigate both lean and busy periods is essential. Building an emergency fund with three to six months of expenses, for example, provides a cushion for unexpected slowdowns.
“The biggest mistake is having no plan,” says Matteo Hoch, a tax professional and financial adviser at Bird Spring Financial who specializes in helping self-employed professionals. He believes that freelancers can often save more than traditional employees by leveraging defined benefit plans and being intentional about making progress.
He also recommends calculating your “run rate” based on the minimum monthly income you need if you lose a client or income source. This strategy can guide your savings plan to match your comfort with income ups and downs, giving you a financial cushion for your long-term goals.
Once your basics are covered, Maloney suggests a “pay yourself first” approach by automatically directing a portion of each paycheck into retirement savings. “Balancing short-term needs with long-term goals can be tricky,” he says—but prioritizing savings early keeps immediate expenses in check while building future security.
2. Make the most of your high-earning years
For self-employed individuals, saving aggressively during high-earning years is key to long-term financial security.
After you establish an emergency fund, focusing on retirement savings can make a lasting difference. “Start retirement savings as soon as possible, ideally within the first year of self-employment,” Maloney advises. “Even small contributions can add up significantly in the long run.”
He recommends maximizing your retirement contributions and setting aside additional funds in a liquid account during higher-income periods. “One common mistake I see is underestimating the importance of consistent contributions,” he says. “Freelancers often prioritize immediate expenses over long-term savings, which can lead to a significant retirement shortfall.”
Putting away 15% of earnings for self-employment taxes and making quarterly estimated payments can also help you avoid large, unexpected tax bills. “During high-earning years, I always advise clients to save more aggressively to build a buffer for leaner times,” Maloney says. He adds that this will help you create a flexible strategy that you can adjust with income fluctuations.
For lower-income years, Hoch suggests using a Roth conversion. This strategy allows you to convert pretax retirement savings, like a traditional IRA, into post-tax savings by paying taxes up front. This can potentially reduce future tax obligations if you expect to be in a higher tax bracket in retirement.
An approach called “tax-gain harvesting” can help freelancers lower their taxes on investments. By selling investments that have gained value and immediately reinvesting in new stocks, you can reset the cost basis to the current value. This way, you can avoid immediate taxes and reduce future tax obligations. This strategy is especially valuable if your income varies from year to year.
3. Use tax advantage accounts
Without an employer-sponsored plan, setting up your own retirement accounts—like a solo 401(k), SEP IRA or SIMPLE IRA—is essential for building long-term financial security. These accounts don’t just help you save; they also offer tax advantages that can lower your taxable income.
If you work alone, a solo 401(k) could be a strong choice. This account has high contribution limits, which allows you to contribute as both an employee and employer to maximize your savings potential. You can also choose traditional (pretax) or Roth (post-tax) contributions, giving you flexibility based on your tax needs.
For more simplicity, consider a SEP IRA, which allows you to contribute up to 25% of your net income. That way, you can adjust contributions based on your cash flow each year. “I often recommend this to clients who have varying income levels,” Maloney says.
A SIMPLE IRA can be another easy, low-cost option if you’re looking for stable, tax-advantaged savings with fewer setup requirements. Though it has lower contribution limits, it’s a solid starting point.
Finally, be sure to review your contributions and account growth regularly to stay on track. “I set aside 10% of every paycheck for my Roth IRA and deposit that as I go. Automating it means I don’t have to think about it—it’s just become a habitual part of managing my finances,” Danis shares. “For my SEP IRA, I wait until tax time so I know what the legal amount I can deposit in that account is because it’s based on my net income that year.”
Freelancing success depends on saving for retirement
By setting up a system that fits her freelance lifestyle, Danis has made retirement savings a natural part of managing her finances, and doing so allows her to continue freelancing successfully.
“When I left my last job and decided to go full-time freelance, I was very serious about not going back to working for someone else,” she says. “Part of taking freelancing seriously is proactively saving for my retirement. So yes—I take it much more seriously now.”
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