How to Save for Retirement as a Freelancer (When Nobody’s Matching Your 401k)
For my first two years of freelancing, I contributed exactly $0 to retirement. My reasoning: “I can’t afford it right now. I’ll start once I’m more established.” Classic freelancer procrastination.
Here’s what that cost me: assuming 8% average annual returns, those two years of $0 contributions at age 32-33 will cost me roughly $40,000-50,000 in retirement value at age 65. Two years of inaction, 30+ years of compounding lost.
I started contributing $400/month in year 3. It wasn’t comfortable, but the tax deduction made it less painful than expected. Here’s how I set it up and what I’ve learned.
Your Retirement Account Options
SEP IRA (Simplified Employee Pension)
Best for: Most freelancers, especially those starting out Contribution limit (2026): Up to 25% of net self-employment income, max $69,000 Setup: 5 minutes on Vanguard, Fidelity, or Schwab Annual filing: None Tax treatment: Contributions are tax-deductible. Growth is tax-deferred. Withdrawals taxed as ordinary income.
The SEP IRA is the easiest retirement account for freelancers. I opened mine on Vanguard in about 10 minutes. No special paperwork, no annual IRS filings, no complexity.
How contributions work:
- Net self-employment income × 0.9235 × 0.25 = maximum contribution
- On $80,000 net income: $80,000 × 0.9235 × 0.25 = $18,470 max
- You don’t have to contribute the max — any amount up to the limit is fine
Tax benefit: Every dollar you contribute reduces your taxable income. A $5,000 SEP IRA contribution at a 28% effective tax rate saves you $1,400 in taxes. The contribution costs you $5,000, but your tax bill drops by $1,400, so the net cost is $3,600.
Solo 401(k)
Best for: Freelancers who want to maximize contributions Contribution limit (2026): Up to $69,000 total ($23,000 employee + $46,000 employer) Setup: 30-60 minutes, more paperwork than SEP IRA Annual filing: Form 5500-EZ when assets exceed $250,000 Tax treatment: Same as SEP IRA (Traditional) or Roth option available
The Solo 401(k) has a higher effective contribution limit for most freelancers because you can make both employee and employer contributions. You can also make Roth contributions (after-tax, tax-free growth).
How it compares to SEP IRA:
| Income | SEP IRA Max | Solo 401(k) Max |
|---|---|---|
| $50,000 | $11,544 | $23,000 + $11,544 = $34,544 |
| $80,000 | $18,470 | $23,000 + $18,470 = $41,470 |
| $100,000 | $23,088 | $23,000 + $23,088 = $46,088 |
The Solo 401(k) allows significantly more contributions, especially at lower income levels where the employee portion ($23,000) exceeds the SEP IRA limit.
Downside: More paperwork to set up, annual filing required over $250K, and not all brokerages offer them for free (Fidelity and Schwab do; some others charge fees).
Roth IRA
Contribution limit: $7,000/year (2026) Income limit: Phase-out starts at $150,000 MAGI (single) Tax treatment: After-tax contributions, tax-free growth, tax-free withdrawals in retirement
The Roth IRA is a supplement, not a replacement. $7,000/year isn’t enough for primary retirement savings, but it’s excellent as a secondary account for tax diversification.
My approach: I contribute to both a SEP IRA (pre-tax) and a Roth IRA (after-tax). This gives me flexibility in retirement — I can pull from pre-tax or after-tax accounts depending on my tax situation.
My Retirement Setup
SEP IRA on Vanguard: $400/month ($4,800/year) Roth IRA on Vanguard: $583/month ($7,000/year, maxed) Total retirement savings: $11,800/year
Investment allocation: 80% VTSAX (total US stock market), 20% VTIAX (international stocks). Simple, low-cost index funds. I don’t try to pick stocks or time the market.
Tax savings from SEP IRA contributions: $4,800 × 0.28 = $1,344/year in reduced taxes.
How to Start When Money Is Tight
Phase 1: Just open the account ($0 contribution) Go to Vanguard.com, Fidelity.com, or Schwab.com. Open a SEP IRA. It takes 10 minutes. You don’t have to deposit money immediately. But having the account open removes the biggest barrier — inertia.
Phase 2: Start with $100/month $100/month = $1,200/year. At 8% average returns, this grows to approximately $130,000 over 30 years. Not enough to retire on, but dramatically better than $0.
Tax savings on $1,200: approximately $340/year. Your $100/month actually costs about $72/month after tax savings.
Phase 3: Increase by $50/month each year Year 1: $100/month. Year 2: $150/month. Year 3: $200/month. By year 5, you’re contributing $300/month ($3,600/year) and the habit is established.
Phase 4: Target 15% of net income Once your income is stable and your other financial foundations are set (emergency fund, tax savings, business accounts), aim for 15% of net self-employment income into retirement accounts.
The Order of Financial Priorities
I get asked: “Should I save for retirement or build my emergency fund first?” Here’s my recommended order:
- Separate business accounts (day 1, costs $0)
- Tax savings (28% of income, from day 1)
- Emergency fund to $1,000 (basic safety net)
- Health insurance (non-negotiable)
- Emergency fund to 3 months (full safety net)
- Retirement savings (start at whatever you can afford)
- Emergency fund to 6 months (optimal)
- Max retirement contributions (when income allows)
Don’t wait for step 7 to start step 6. Even $50/month to retirement while building your emergency fund is better than $0. The compound growth you lose by waiting is significant.
Common Retirement Mistakes
Waiting until you “can afford it.” You’ll never feel like you can afford it. Start small now. The tax deduction makes it less expensive than you think.
Choosing complicated investments. You don’t need to pick stocks or understand options. A single target-date fund or total market index fund (VTSAX, FSKAX) is all you need. I’ve tried picking stocks. I’ve tried sector funds. Index funds beat them all over time.
Not taking the tax deduction. SEP IRA and Solo 401(k) contributions are tax-deductible. The deduction makes retirement savings 25-35% cheaper than it looks. Factor this into your decision.
Contributing to a Traditional IRA instead of SEP IRA. Traditional IRA limit is $7,000/year. SEP IRA limit is up to $69,000/year. If you’re freelancing, you have access to much higher limits through SEP IRA or Solo 401(k). Don’t leave that on the table.
The Bottom Line
Nobody is saving for your retirement except you. There’s no employer match, no automatic enrollment, no default contribution. You have to make it happen.
Open a SEP IRA today (10 minutes). Start contributing whatever you can ($50, $100, $200/month). Increase annually. Invest in index funds. Take the tax deduction.
The freelancer who starts saving $200/month at 30 and increases by $50/month each year will have approximately $800,000-1,200,000 at 65 (assuming 8% returns). The freelancer who waits until 40 to start needs to save 3x as much per month to reach the same number.
Time is the most valuable retirement asset. And it’s the one you can’t buy back.