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Retirement Savings for Contractors

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If you’re a contractor, saving for retirement can be much more complicated than it is for employees. Instead of filling out a few forms to opt in to your company’s 401(k), you have to do some extra research, logistical, and saving legwork.

The basics

Here are the main decisions you’ll need to research and make to get your savings plan up and running:

Account type: The right choice can depend on the details of your work and tax situation. This can be the trickiest issue to figure out since you may need to navigate some complex tax rules.

How much to save: In theory, you want to save as much as you can, but there are limits on how much you can save in each type of tax-advantaged account.

Who to save with: You’ll need to pick a financial institution to set up your account with. Which one you go with may affect what investments you can choose from and what you pay in fees.

What investments to buy: You’ll want to invest your retirement savings to help them grow.

Account types

Although you can simply build up savings in an ordinary brokerage or bank account, choosing a dedicated, tax-advantaged retirement account, such as an Individual Retirement Account (IRA), can help your money go further (and grow faster) during your saving years.

Here are your main choices:

How to choose

Choosing an account type can be overwhelming, but here are some rules of thumb for homing in on the right option:

When in doubt

Tax rules can be a minefield, and mistakes can be expensive—such as if you accidentally make contributions that aren’t deductible.

If you’re having trouble navigating some of the finer points of the account types or calculating the maximum you can contribute, find a tax advisor who can help.


To make sure you get the most out of your retirement plan as a contractor, try to:

  • Save as much as you can.
    • A solid rule of thumb is to aim to put at least 15% of your income into retirement savings.
  • Get your asset allocation right.
    • If you’re young, chances are you want to mainly own stocks in your retirement account.
  • Build retirement savings into your compensation.
    • If you charge a set rate, make sure it includes what you need to put into retirement savings—not just what you need to get by.
  • Make it a priority.
    • Even if you’re not planning to be a contractor for long, get a retirement savings strategy up and running. That way, even if things don’t go as planned, you won’t be neglecting your future.


Being a contractor has its perks, but straightforward retirement planning isn’t one of them. The main hurdle can be choosing the right type of account (or combination of accounts) and making sure that your deductions and other tax ducks are in a row.

Fun facts

  • Roth IRAs are the unicorns of retirement accounts because you can withdraw the money you contributed anytime, for any reason. (Withdrawing earnings—meaning the returns you’ve earned on the money you’ve contributed—is a different story.)
  • One in three Americans does some kind of gig work.
  • Gig workers tend to feel more financial distress than non-gig workers—even if they have regular employment and their gig is just a side hustle.

Key takeaways

  • If you’re a contractor, it’s up to you to put in the research and legwork to get your retirement savings on track.
  • The trickiest choice you’ll need to make is what type of account to save in. Your main options are a traditional IRA, Roth IRA, SEP IRA, and Solo 401(k).
  • The right account type can depend on how much money you earn, how much you want to save, and other details of your tax situation. When in doubt, a tax advisor can help you decide.
  • You’ll also need to choose a financial institution to set your account up with, decide on a savings rate, and choose investments to help you grow your savings over time.
  • Although it can be tempting to let your retirement savings lapse when you’re a contractor, try to make it a priority. After all, retirement won’t happen unless you make it happen.


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