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Last Updated on May 16, 2023 by Work In My Pajamas
Self-employment is exciting but can also be stressful if you don’t have a guaranteed source of income or work on a short-term contract basis. When it comes to planning for your retirement as a self-employed worker, this can be even more tricky as your income fluctuates. This makes paying the standard recommendation of 10-15% first for retirements/rainy day fund seem like a daunting amount. Not to mention working out the tax, even if you are an established self-employed worker, the tax season is never one to look forward to.
If you are looking at how to start saving for your retirement as a self-employed worker, consider the following tips and remember, it’s never too late to start and the sooner you get saving, the more you can enjoy when you come to retirement age.
In This Post:
Plan Out a Retirement Scenario
While we can’t prepare for every single occurrence that might happen to us as we get older, we can look at our family history and lifestyle to get an idea of your potential retirement requirements.
For example, if you know that your family has a history of medical needs in old age, you can increase your monthly retirement pot contributions to accommodate the need for a hired nurse, local nursing home or a dedicated residential home, like this specialist care home in Waltham Abbey. If your family has a history of living long, you might want to ensure that you can live comfortably even if your retirement was to span an additional 5-10 years. Likewise, if you are a dedicated pet owner and plan on owning pets during your retirement, you’ll need to ensure you accommodate your pet’s needs and potential bills over their lifespan.
Look at Differing Retirement Saving Accounts
In the UK, the government is trying to encourage the general population to take a greater responsibility over their potential retirement and pension savings and as such, have facilitated the offering of dedicated retirement accounts. These retirement/pension savings accounts come with tax relief, meaning that your money can go further than you think. For instance, basic rate taxpayers can save 20p in tax for every pound saved in a dedicated pensions account.
It will soon be law for all employers to provide their employees with a workplace pension scheme that both parties can contribute to. Staff can talk to their employer about potentially increasing their personal contributions into their workplace pension which automatically get taken from wages prior to tax and offers more return than paying into a private pension after wages have been taxed.
Consider Retirement Assets
Cold hard cash isn’t the only way to save for retirement and if you have some high-value assets such as luxury vehicles, property or stocks/shares, these can be sold off once you reach retirement age. This can be a popular option however you must be careful with the type of assets you purchase and ensure you consider loss of value, fluctuations in demand and plan for potential inflation. Talk to a dedicated and professional financial advisor if you would like to devote some of your retirement funding to physical assets and what the best investment assets are right for you and your budget.
Set Achievable Targets and Goals
To make sure you are on track for your retirement target age or funding amount, make sure to track achievable saving goals that are scalable depending on your income. Make sure your goals include an ideal amount of savings and a minimum amount of savings so you can track this over the years and make top-ups when incomes were restricted and prevented you saving the target amount.
Don’t forget! Even if you miss a monthly target by a lot, every little helps towards your overall retirement savings target or pension pot and it all contributes to ensuring a comfortable retirement lifestyle when the time comes. No-one else is going to worry about your retirement and at the end of the day, it’s no-one’s responsibility but your own, so make sure you start planning as early as possible.
