The struggle of saving while self-employed

"The self-employed aren't doing particularly well at retirement planning," said Anne Tergesen at The Wall Street Journal. Only 36 percent of people who work for themselves say they save regularly for retirement, according to a recent survey by the Transamerica Center for Retirement Studies, compared with 54 percent of people who work for others. The self-employed — a category that ranges from gig workers who book their jobs online to small business owners — are one of the fastest-growing segments of the workforce. But the freedom they get from being their own boss is often accompanied by a volatile income, making it hard for them to put money aside consistently and even harder to predict how much money they'll have in retirement. For many self-employed people, "working longer is their retirement plan," said Kerry Hannon at The New York Times. More than half say they expect to retire "either after age 65 or never."

When you work for yourself, saving for retirement can be a struggle both financially and mentally, said Jeanine Skowronski at USA Today. "It not only can feel less important than getting your business or trade off the ground, but also can seem like you won't have spare money to set aside for a good long time." The key is to adjust your mindset. Because of their fluctuating income, solo workers "can't budget the same way that a non-self-employed person would." It can help to think about retirement savings in percentages rather than dollars. Saving a set dollar amount can cause you to save too little in high-income months and more than you can actually afford during lean months. And be aware that falling behind on quarterly tax payments can derail any self-employed savings plan. Make sure you properly work your tax payments into your budget — factoring in income and self-employment tax — "so you don't wind up spending dollars you don't really have."

"Being self-employed doesn't mean you have fewer options in deciding where to invest for retirement," said Rebecca Lake at US News. In fact, the real challenge is figuring out which type of plan to choose. A solo 401(k) is designed to cover a business owner with no workers, while a SEP IRA can also cover employees. Both plans let business owners contribute 25 percent of compensation or $54,000 per employee in 2017, whichever is less. "Those limits are more generous than the annual contribution limit for a traditional or Roth IRA, giving you more opportunity to save cash for retirement." Savers can also contribute up to $12,500 annually to a SIMPLE IRA, another plan designed for small businesses. "All three plans allow additional catch-up contributions if you're 50 or older." Once you've picked the right plan, make those monthly contributions automatic. That way, you'll still be "paying yourself first, even in lower-income years."

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