If you’re self-employed, you’re probably familiar with some of the perks: greater flexibility in your schedule, the ability to refine and direct your career – even simple things like getting to wear whatever you want. But how do you feel about retirement savings?
Many self-employed entrepreneurs face a not-always-steady workflow and unreliable income. In fact, it’s common for self-employed entrepreneurs to be so focused on their businesses that they don’t start to save for retirement until it’s too late. Others have no idea where to even begin.
Fear not! You may no longer have an employer to worry about it for you, but saving for retirement when you’re self-employed is possible! Here are five things you can do right now to put your mind at ease:
1) Set up an automatic withdrawal to a separate account
Whether funds go into an official RRSP, TFSA, or some other separate savings account, an automatic withdrawal can be a great way to put a bit of money aside without having to think about it. Be sure you set the amount to one you can afford to do without every month – depending on the type of account you transfer the money to, there may be penalties or stringent conditions if you want to get that money back.
2) Change your thinking about retirement savings
When you think about saving for retirement, you likely think of the big picture – the whole amount you’ll need to sustain you in your golden years. Terrifying, right? No wonder many self-employed entrepreneurs put off saving.
But what if you thought about it it the same way you thought about regular expenses like printer paper and travel costs? You couldn’t eliminate some of those costs, because then your business would suffer. You find a way to meet those expenses.
Think of retirement savings in the same way. If you eliminate saving for retirement, your future security will suffer. Don’t worry about the big picture – instead, think of retirement savings as an essential expense of your business.
3) Seek professional help
You most likely consulted an expert for their advice when you were getting your small business up and running, and saving for your retirement is no different.
Whether you have a dedicated financial advisor or are happy to speak to whoever is working at your bank that day, it’s important to consult an expert when it comes to saving for your retirement. They be able to help you design a savings plan that suits your business and your retirement goals, and they can advise you on certain retirement savings plans you may not know about – such as an Individual Pension Plan (IPP) or the relatively new Personal Pension Plan (PPP).
4) Start small if you have to
Whether you’re a 25-year-old freelancer with all the time in the world, or a just around the corner from retirement age, there’s no rule that says you have to contribute thousands of dollars at once to your retirement fund.
Even if you can only contribute $100 a month, it counts. You can always increase that amount once you feel more secure. Depending on the type of retirement savings plan you choose, you may be able to gradually increase your contribution amounts, or contribute different amounts each time.
5) Start now
There’s no perfect time to start saving for your retirement when you’re self-employed. There will always be periods of uncertain income, and there will always be expenses to pay. It’s better to put aside even 1% – 2% of your income aside right now than arrive at retirement and wish you had invested in yourself while you had the chance.
Saving for retirement when you’re self-employed takes discipline, strategy, and a commitment to see it through to the end – all things you’re already doing in your small business anyway!
Get more information at the GoForth Institute
The information in this article is intended as general only and is not meant as a substitute for professional financial advice. Always seek the expertise of a professional financial advisor prior to making any decisions.