How to save for retirement when you don't have a 9-5


As many as 60 million American workers don't have a traditional, 9-5, full-time job — and those contractors, freelancers, part-timers, and other independent workers face extra challenges when it comes to saving for retirement. Only 56% of independent workers are actively saving for retirement, compared to 72% who are in traditional roles, according to data from T. Rowe Price.

One challenge: setting up your own retirement plan. Opening an account is easy, but it's important to carefully assess the different options to make sure you pick one that fits your needs, says Levi Sanchez, a certified financial planner and founder of Millennial Wealth, a Seattle-based financial firm that works with many contract and freelance workers.

Here are three of the retirement account options for independent workers, and how they compare.

1. Traditional or Roth IRA

One of the simplest ways to save for retirement is to open up an individual retirement account, or IRA. There are several kinds, but the most common choices are a traditional or Roth IRA. Both are available to just about anyone with earned income, and you can open one at many commercial financial institutions.

The key difference between the two is when you pay taxes. With a traditional IRA, your contributions are typically tax-deductible, and you'll pay taxes when you make withdrawals in retirement after age 59½.

With a Roth IRA, you make contributions after paying taxes. Those funds grow and can be withdrawn tax-free in retirement.

The limiting factor of these kinds of IRAs, however, is you can't save much. As of 2019, workers under 50 can contribute a maximum of $6,000 per year. Think of it this way: If you make more than $40,000 a year, you won't be able to meet that goal of setting aside 15% of your salary for retirement with an IRA alone. Also keep in mind that the IRS sets income limits for Roth IRA contributions, and for deducting your contributions to a traditional IRA.


A Simplified Employee Pension — also known as a SEP, or SEP-IRA — is a retirement account that can be opened by anyone who earns self-employment income. This type of IRA is designed to act as a profit-sharing plan, generally for small businesses, and employers can make tax-deductible contributions of up to 25% of employees' net earnings per year, up to a maximum of $56,000 for 2019.

For the self-employed, the contribution limit works out to 18.6% of your business's net profit. So, depending on the structure of your business, your ability to set up and contribute to a SEP-IRA may change.

3. Solo 401(k)

Setting up and managing a solo 401(k) — which may also be called a one-participant 401(k) or individual 401(k) — entails a bit more paperwork than an IRA, but it can be your best bet to supercharge your retirement savings. "You can put more into a 401(k) than you can with an IRA," points out Sanchez, who generally recommends that most, if not all independent workers sign up for a solo 401(k).

The supercharging power of this account is that you're able to make tax-advantaged contributions as both the employee and the employer. As the employee, you can put in a maximum of $19,000 in 2019 if you're under 50. As the employer, you can defer up to 25% of your total compensation or net self-employment income. Your combined total contribution can be up to $56,000 this year.

Some brokerages also offer a Roth solo 401(k) option, which can be an even better retirement savings play. Like with a Roth IRA, Roth 401(k) contributions are taxed up front, letting you take out the money tax-free in retirement.

"If you can save in a Roth 401(k), consider yourself lucky," John Iammarino, a financial advisor at Securus Financial in San Diego, California, recently told Grow. "My message is Roth all day, every day, if you can."

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