How to save for retirement when you’re self-employed is a critical question that most entrepreneurs overlook. Somehow, amid all the hassle of running a business and managing its finances, pension saving doesn’t seem like a priority.

For most people, the conditions that come with self-employment are close to ideal. You get to be your boss, set your working hours and decide the conditions you want to work in. However, self-employment can deny you the perks of employment, for example, in matters pension. See, employed persons are typically set up into a workplace pension. As a business person, that responsibility solely lies with you. This blog offers tips to help you figure out how to save for retirement when you’re self-employed.

Starting Early: An early start is crucial while saving for retirement when you’re self-employed

While retirement saving might not seem like an urgent matter when you’re young and energetic, it is crucial to understand it. Starting early is one of the unspoken rules of successfully saving for retirement when self-employed. Starting early ensures you have a longer time to plan and save for your pension. This provides you with an opportunity to save more. The longer saving time also allows you to spread out your savings, saving a lower, more manageable amount.

However, this doesn’t mean there is no hope if you are “late”. It only means that the best time to start is now.

Set Goals: These help you see the bigger picture

Failing to plan is essentially planning to fail. You need to set clear retirement goals to guide your vision in the long term and get the short-term motivation to get started. Setting goals also helps you be more focused, measure your progress, avoid procrastination, and enhance the possibility of achieving even more than you expected. Like with all others, your retirement saving goals as a self-employed person needs to be SMART: Specific, Measurable, Achievable, Relevant and Time-bound.

Here are a few general guidelines you could consider using as a pension saving to age blueprint:

• At age 30: 1x your annual business income
• By age 40: 3x your annual income
• Before age 50: 6x your income
• At 60: 8x your income
• Age 67 (retirement age): 10x your yearly earnings

Know Your Options: This sets you up to make the right choice

Employed persons are typically set up in a pension scheme by their employers. Fortunately (or unfortunately) for self-employed persons, the burden of choice lies on you. However, the silver lining is that there are many options to choose from to get what works for you.

The first step to understanding your pension saving options is to perform extensive research. A great place to start is a quick internet search. Find out what other self-employed persons are using. What’s working for them? What isn’t? You can also talk to consultants and other participants in the pension industry. Some of the options you will hear about include:

• Individual 401k plans
• Individual Retirement Accounts (IRAs)
• Simplified Employee Pension options for self-employed persons (varies with countries)
• Other non-retirement investment accounts

Once you find out all your options, perform a thorough analysis to determine which fits you best and aligns perfectly with your goals, and then choose it.

In Summary

Learning how to save for retirement is the first step to successful preparation. However, preparation without action is futile. Therefore, once you’ve decided to start early, prepared SMART goals, established your options and selected the right one, immediate execution should follow.

Read this article on how to plan for your retirement in your 30s to get more insights.