Retirement Planning for Freelancers

This was the topic of a Deep Dive Networking session hosted in June 2025 by ATA’s Business Practices Education Committee. The participants were given a set of loose questions as a starting point. The following is a summary of these discussions. This article focuses on retirement in the United States, although some attendees also talked about retirement abroad, which has its own challenges that warrant a separate article.

But before we dive in, a necessary disclaimer: This article does not constitute legal, financial, or tax advice and does not claim to cover every possible aspect of financial retirement planning. When in doubt, please consult a financial professional. Further, any mention of or links to financial services or products does not constitute an endorsement. Please do your own research and/or consult a financial professional. Finally, any links to external websites have been vetted at the time of writing, but there’s no telling what is going to happen with those links in the wild world of the World Wide Web. Follow these links at your own discretion.

How do you calculate how much you need to retire comfortably?

This was the first question posed, to which most attendees replied that they were saving as much as they could and hoped for the best. To achieve a maximum amount of savings, they recommended automatically saving a certain percentage of your income every month.

Many participants also recommended talking to a financial advisor at some point to get a better picture of one’s financial health. For the do-it-yourselfers, several online calculators were recommended to help with the planning:

• Retirement Calculator by Calculator.net – a retirement calculator that calculates how much you need to retire, given your current age and desired income in retirement: https://www.calculator.net/retirement-calculator.html
• Investment Goal Calculator by Bankrate – calculates how much you need to save each month, given a total investment goal (which you can also calculate with the aforementioned Retirement Calculator): https://www.bankrate.com/investing/investment-goal-calculator/

What steps have you taken to prepare for retirement as a freelancer?

Here, most attendees stated that they also invested in some form of retirement fund, in addition to their expected social security benefits. In general, in the US, employees have the option to invest in an employer-sponsored retirement fund called 401(k) with certain tax advantages, and depending on their income level, also to a specific type of individual retirement savings accounts called Roth IRAs. For freelancers and small business owners, on the other hand, which is the topic of this article, there most common retirement accounts include the following options:

• A SEP IRA (Simplified Employee Pension plan): https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep
  Here, an employer (or yourself, if you are a solo freelancer or small business owner with or without employees) can contribute for each employee the smaller of $70,000 (for tax year 2025) or 25% of that employee’s compensation pre-tax (however, limits exist for high earners). This means that if you are self-employed, you can contribute up to 25% of your self-employment income and lower your taxes. However, you will pay taxes on the money you take out in retirement. In other words, you don’t pay taxes now, but you will pay taxes later, in retirement, similar to a 401(k) for non-self-employed employees. More information about limitations and restrictions can be found on the IRS website.
• A Roth IRA: https://www.irs.gov/retirement-plans/roth-iras
  This is a retirement account that you can contribute to after taxes, but the money in the account will grow tax-free. This means that you pay all your taxes now, but you won’t pay taxes later when you take money out in retirement. The drawback of Roth IRAs is that they have a yearly contribution limit, currently $7,000 ($8,000 if you are over 50) per year, and high earners may not qualify. Again, for more information, please see the IRS website or your financial advisor.

For both of these types of retirement accounts, you can begin withdrawing money at the age of 59 1/2 without penalties. Other circumstances may apply, circumstances where you can take money out at an earlier age without tax penalties, but for those I also refer you to the IRS website.

There are other types of retirement accounts for small corporations, for example, but these are more complicated to administer and will therefore not be discussed here. You can also open a high-yield savings account or a general brokerage account to invest in. These types of accounts do not have any tax advantages, meaning you will be taxed when you put the money in and when you take the money out. However, high-yield savings accounts with immediately accessible funds were recommended by the discussion participants for an emergency or rainy-day fund, which is always a good idea to have, even when not planning for retirement.

Opening one of these accounts, for example with an online brokerage, is a fairly simple process. The author has both a SEP IRA with one well-known brokerage and a Roth IRA with another well-known brokerage, which she managed to open within one day, all quite straightforward and entirely online. Once the account is open, you can fund it immediately (up to the aforementioned legal limits) and begin choosing your investments. The choice of investments is very individual and exceeds the scope of this article. Several Deep Dive networkers recommended asking a financial advisor and reading investing books and newsletters.

Also mentioned as investment and savings vehicles were real estate and annuities. The real estate landscape in the US varies dramatically from one location to the next, and the choice of whether it makes sense to buy your home (possibly with a sizeable mortgage) or rent depends on your individual circumstances and location. This discussion exceeds the scope of this article, and I again refer you to a financial advisor.

Yet another possible type of account to fund is a Health Savings Account (HSA), which brings us to the next question that was discussed in depth:

What are your plans for health care coverage in retirement, especially if you expect to live in the US?

In the US, people have the option to enroll in Medicare at the age of 65, https://www.medicare.gov/. The Deep Dive attendees all recommended signing up as soon as legally possible, and also informing yourself about additional options such as Medicare Advantage, which is run through private companies, and possibly other supplemental health insurance plans.

Another discussion point was the already-mentioned Health Savings Account (HSA), which allows you to contribute pre-tax money, meaning you lower your tax bill at the time of contribution. If you use the money in your HSA for medical expenses, you can also take out that money tax-free. So, if you are eligible, an HSA offers both pre- and post-tax benefits. The eligibility criteria are somewhat complex and depend on the type of health insurance you have. For more information, see the IRS website at https://www.irs.gov/publications/p969. Further, the yearly contribution limit is only $4,300 for individuals for 2025.

What retirement planning advice would you give a new freelancer?

All Deep Divers agreed that it is never too early to start saving, even if it is just a small amount that you take out of every incoming payment. If invested wisely, that small amount can grow significantly over time. Calculator.net has a number of calculators for retirement, Roth IRAs and Social Security benefits, so you can find out for yourself: https://www.calculator.net/financial-calculator.html

Finally, if you feel you are late with your planning, remember the old Chinese proverb: “The best time to plant a tree was 20 years ago. The second-best time is now.”

About the Author

Carola F. Berger, PhD, CT is an ATA-certified patent translator, translating between German and English. She has been doing business in California since 2010, first as a sole proprietor without a fictitious business name, then doing business as CFB Scientific Translations for a long time. Since 2020, she has owned and operated CFB Scientific Translations LLC.