Planning for Retirement: 3 Considerations for Self-Employed Women

For much of the working world, planning for retirement is a given. Contributions come out of every paycheck automatically and are invested in a retirement plan. The whole thing works rather seamlessly. “For most of us who are working stiffs, the plan is handed to us,” said Ric Edelman, CEO of Edelman Financial. However, people who work for themselves “tend not to create a retirement plan in the first place.”

The research backs up Edelman’s comments. A study from TD Ameritrade shows that 28 percent of self-employed people do not save for retirement and 40 percent only occasionally put aside money for their later years. Instead, they get trapped in a cycle. Any extra money goes to savings in case money is tight next month or the money gets reinvested in the business. It might make sense on the surface, but that’s actually bad business.

The money you invest in your business could be paid for over time using financing instead of paid out of pocket — and if you aren’t saving for retirement, you are missing out on the value of compounding returns. To make matters worse, many women tend to save half as much as men do when it comes to retirement. Blame on the wage gap or the taking of time off to raise children, but the reality remains the same.

If you are a self-employed woman and you want to retire comfortably, the time to start planning for retirement is now.

Managing Investments

You can begin planning for retirement by looking at your current investments. If you are not currently saving money each month, that’s a good place to start. Automating savings can help. Even small contributions, when made consistently, will have a positive effect on your retirement portfolio. The key is to start saving early so you can enjoy the benefits of compounding.

Once you have some money saved, make sure you understand your retirement planning options. Investing in IRAs, mutual funds and the stock market are ideas, but they aren’t the only ones. As a self-employed person, you could invest in a solo 401(k) as long as you don’t have employees. Defined benefit plans are another possibility.

Planning for Spending

Also, plan for your spending in retirement. Saving money is great but it helps to have a goal. According to The Street, people who are 65 or older spend over $44,000 per year on average. The media is much lower at just under $31,000 per year, but it is still more than many self-employed people have saved. While you might be able to afford a more comfortable lifestyle if you continue working to some degree, if you start planning now you could avoid working after a certain point altogether.

For instance, housing costs account for 35 percent of spending in retirement. If you plan ahead, you could avoid some of that expense by paying off your home before you retire.

Don’t Forget Health Insurance

Another serious expense is healthcare — specifically health insurance, medical care and medication. For households over 75, healthcare is roughly 15 percent of their expenses. Choosing individual health insurance plans based on price alone might seem like a good way to reduce your fixed expenses, but cheaper plans tend to cover less. You might be able to reduce your total healthcare costs in retirement by choosing a health insurance plan that covers more, even if it costs more.

Going Forward

Some self-employed people believe that their businesses are like retirement plans. By putting everything into their businesses, they can grow it to the point that they can collect enough income to retire comfortably — but that is a big risk. Instead of putting your eggs in one basket, diversify your approach. Start saving for retirement right now — even if it is just a small amount each month — and educate yourself on the costs you will have in retirement. Spend time getting your investments in order, planning for spending and arranging for health insurance.


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