4 Simple Steps to Save for Retirement as a Freelancer
More and more Americans are forgoing the morning commute to the office in exchange for a freelancing career. Over 36% of Americans are freelancers, and that number is estimated to rise to over 50% in 10 years if the growth of gig workers across the country stays at its current rate.
Nearly 8 in 10 freelancers say they prefer the freedom of freelancing over a traditional job. And there’s plenty to love — making your own schedule, being your own boss and, of course, working in your pajamas.
But when it comes to saving for retirement, freelancers have a harder time than their 9-to-5 counterparts. Whereas many traditional employers provide retirement plans for their employees, it’s up to freelancers to establish a system to save for retirement.
And for many, this isn’t easy — less than 4 in 10 self-employed workers in a survey reported that they’re “habitual” retirement savers.
But freelancers aren’t the only ones not saving enough. In a survey of 2,003 Americans, 21% had no retirement savings, while 1/3 had less than $5,000.
Apart from not having an employer-sponsored retirement plan, freelancers face specific hurdles that can make it harder for them to save for retirement.
Compared to traditional positions, a freelancer’s income can be irregular or unsteady. And many freelancers have a lower average annual salary than their employee counterparts (although research shows freelancers also put in fewer hours a week, on average).
But whether you’re fresh out of college or have decades of freelancing under your belt, there are steps you can take today to build your retirement savings so you can enjoy a better tomorrow.
1. Start Saving at Least 10%-15% of Your Income
Most experts recommend saving 10-15% of your income into your retirement savings to be comfortable and secure in your golden years.
However, the exact amount you save every month should be based on your income, expenses and financial goals for the future.
Depending on the type of retirement account you get, you can also get a tax credit on top of the tax deduction as a low-income saver.
Just remember that if you’re self-employed and had net earnings greater than $400 this year, you’ll need to file a 1040 form with the IRS to pay taxes for Medicare and Social Security (which would traditionally be withheld by your employer).
2. Create an Automatic Savings Plan
Getting in the habit of saving is the root of any successful retirement savings plan.
If regularly saving money isn’t exactly your forte, an automatic savings plan that pulls money from your checking account into a retirement savings account can help.
Without even thinking about it, you can put away a set amount of money into your retirement savings every month. By the end of a year or so, you can have a good nest egg to start growing with smart investments.
3. Open a Self-Directed SEP or Solo 401(k).
Once you become a savvy retirement saver and are ready to set aside more for your golden years than just the $5,500 a year allowed in a traditional IRA, you may want to open a Solo 401(k) or a SEP IRA.
A SEP IRA adds the ability for your business to make a profit sharing contribution of up to $55,000, or $61,000 if you are age 50 or older (2018 limits). This can be a considerable tax deduction, and a real means to build your tax-sheltered retirement savings on the front end.
The best option for most self-employed freelancers is a Solo 401(k), also known as an Individual 401(k), The maximum limits are the same as with the SEP IRA, but you can get there on a lower amount of overall income.
In addition to the same employer profit-sharing contribution the SEP has, a Solo 401(k) allows you as an employee of your business to contribute up to $18,500, or $24,500 if you’re over 50.
Plus, the Solo 401(k) provides a powerful set of Roth savings features that can really maximize the amount of tax-free money you can create for your future self.
4. Invest in Alternative Assets with a Self-Directed IRA
Any type of an IRA or 401(k) can be made into a self-directed IRA.
A self-directed IRA gives you the ability to invest in alternative assets outside of the stock market, including rental properties, your friend’s new startup or even an alternative energy enterprise.
When you invest wisely, you give yourself the opportunity to put your personal passions and investment knowledge to work to grow your retirement savings — at a tax-deferred or tax-free rate.
And when you use a checkbook control IRA structure, you get even closer control of your retirement account — without transaction fees or third-party processing delays.
Safeguard Advisors, LLC is not an investment advisor or provider, and does not recommend any specific investment.
We provide properly structured self-directed retirement plan platforms that provide you as the investor with full control over investment decisions.
The information above is educational in nature, and is not intended to be, nor should it be construed as providing tax, legal or investment advice.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
