Retirement Planning for Self-Employed Individuals and Small Business Owners

By Chris Duderstadt

August 2, 2023

Retirement Planning for Self-Employed Individuals and Small Business Owners

Key Points – Retirement Planning for Self-Employed Individuals and Small Business Owners

  • What Are Some Retirement Planning Strategies That Are Especially Useful for Self-Employed Individuals and Small Business Owners?
  • The Importance of Saving Early for Retirement
  • Breaking Down the Different Contribution Limits of Retirement Accounts
  • Strategic Investing Opportunities for Self-Employed Individuals and Small Business Owners
  • 9 Minutes to Read | 23 Minutes to Watch

Retirement Planning Is Different for Everyone

What does your ideal retirement look like? That answer is different for everyone because no two people are the same. Even if you have similar interests, career earnings, and are the same age as your best friend, your retirement plan will still look a lot different than theirs. Today, we’re going to discuss some specific retirement planning strategies for self-employed people and small business owners.

Did you know that according to the Bureau of Labor Statistics, 16.6 million people are self-employed? And according to the U.S. Chamber of Commerce, there are 33.2 million small business in the U.S., which is 99.9% of U.S. businesses. So, there are a lot of people who can benefit from these retirement planning strategies for self-employed individuals and small business owners that we’ll be reviewing.

One of the potential luxuries of retirement planning for traditional employees is being able to contribute to an employee-sponsored retirement plan. That isn’t the case with retirement planning for people who are self-employed. They’re on their own to figure out how to save for retirement. If you’re self-employed or a small business owner, we’ve outlined some retirement planning tips to help get you started. If you’re not self-employed or a small business owner but know someone who is, please pass along this list to them. We hope it can help you or someone you know.

Retirement Planning Strategies for Self-Employed Individuals and Small Business Owners

1. The Earlier You Start Planning, the Better

This is really a universal retirement planning tip, but it’s even more important if you’re self-employed or a small business owner. We say all the time that time is our greatest asset. Normally, we’re talking about time in the sense that we want you to build a retirement plan that allows you to have more time to do the things in retirement that are important to you. In this case, the point of saving early for retirement is that it allows more time for your money to grow. Make the most of your working years and retirement years by saving for retirement sooner rather than later.

Dean Barber and Bud Kasper Reflect on Their Previous Experience as Small Business Owners

Modern Wealth Management Managing Directors Dean Barber and Bud Kasper were small business owners early on in their respective careers. One of the last things that was on their minds during that point in their careers was their retirement plans. That has certainly changed over time for both of them. They have some unique retirement planning knowledge that they like to share with self-employed individuals and small business owners.

“One of the things that we really talk about for small business owners is to understand that if you’re confident that the business is going to be successful, you need to start that retirement planning early. It’s just like when we encourage people to sign up for their company’s 401(k) plan or begin saving into an IRA or a Roth IRA as soon as you get your first job.” – Dean Barber

2. Define Your Goals for Retirement

Saving for retirement is pivotal, but it’s only part of the retirement planning process. When you’re working, it can be easy to get stuck in a save, save, save mindset and not really think about what you actually want to do in retirement. Your savings and investments are the engine that make your financial plan run. Your plan should be centered around your goals and ideal retirement lifestyle.

When you’re building your plan, make a list of things that are most important to you and your spouse. Then, determine the costs of those things to determine if your goals are realistic. Maybe you have already saved enough to do those things that you want to do and have enough to cover your everyday needs in retirement. If so, congrats on achieving financial independence. If you’re not quite there yet, maybe there are some trade-offs that can be made to improve the probability of success of your plan. Either way, set some retirement goals and build your plan according to those goals.

3. Traditional and Roth IRAs

Oftentimes, the biggest asset for traditional employees will be their 401(k). If you’re self-employed and are planning for retirement, how are you going to build a significant amount of retirement income since you don’t have the option of an employee-sponsored retirement plan? One of the most popular options for self-employed people are taking advantage of tax-advantaged retirement account. Those include traditional and Roth IRAs.

“Those are not part of any business. You’re just making a contribution and you have limits on income for deductibility. For the married filing jointly in 2023, your income must be under $116,000 to have an IRA be fully deductible. It phases out that deductibility between $116,000 and $136,000. For a single individual, that phase out starts at $73,000 and goes up to $83,000.” – Dean Barber

Any contributions that you make to a traditional IRA will be taxed when you take the money out. The earnings within the account will grow tax-deferred until you take it out. On the other hand, the Roth IRA is taxed up front and all your earnings and distributions are tax-free. There are advantages and disadvantages (or unintended consequences) to traditional and Roth IRAs. Make sure you’re working with a professional if you’re self-employed and planning for retirement so that you understand the pros and cons to each and figure out which is best for you currently and going forward.


Most people have at least heard to traditional and Roth IRAs, but what are SEP and SIMPLE IRAs. We’re glad you asked. SEP stands for Simplified Employee Pension. SEP IRAs contributions are tax-deductible just like traditional IRAs. However, they have higher contribution limits than traditional IRAs. Another perk of SEPs is being able to contribute to it as an employee and employer.

The SEP limit for 2023 is 25% of $330,000 limited to a maximum annual contribution of $66,000. If you’re just self-employed, that can be a big deal. It can be done in the form of a Roth now as opposed to just being a pretax dollar. But there’s a catch.

“If you’re no longer just self-employed and have hired one, two, three employees and are still doing the SEP, if you’re doing 25% of your compensation, you also need to do 25% of the compensation for all your employees. We see a lot of people that are self-employed when it’s just them taking advantage of the SEP IRA.” – Dean Barber

SIMPLE stands for Savings Incentive Match Plan for Employees. If you’re self-employed and have a few people working for you, this could be right up your alley. SIMPLE IRAs give self-employed people and their employees the opportunity to make contributions. Whereas 401(k)s can be complex for the employer and employees, SIMPLE IRAs are exactly what they say they are. They’re simpler to navigate than 401(k) plans.

“SIMPLE IRA contribution limits for 2023 for anybody under the age of 50 is $15,500. You can do salary deferral into the SIMPLE plan and do it either pretax into traditional or you can do it after tax into the Roth.” – Dean Barber

5. Health Savings Account

Our fifth retirement planning strategy for the self-employed and small business owners is contributing to a Health Savings Account if you have a high-deductible health insurance plan. HSAs are typically utilized for health care costs, but if you’re using them right, they can be a beneficial option as you’re saving for retirement. In 2023, you can put in $7,750 for a married filing jointly if you’re under age 55. If you’re over age 55, it’s $8,750.

“The HSA is a great thing because it can accumulate over time and still be used after you retire to pay for health care expenses and prescriptions. There are a lot of things that can qualify to be paid for by the HSA. The beauty of it is it grows tax-free and comes out tax-free to pay for those things.” – Dean Barber

6. Considering Disability Insurance

While we’re on the topic of health, disability insurance is something that should be considered when retirement planning for the self-employed and small business owners. Disability insurance not only can impact you and your family, but it could impact other employees that you have if you don’t have disability insurance.

“Disability insurance is part of the planning process. If you’re not familiar with it and you need some help, we’re here to help.” – Bud Kasper

7. Strategic Investing

What does your money need to do for you and how do you feel about money? Those are important retirement planning questions to ask yourself whether you’re self-employed, a small business owner, or working for someone else. Do you understand investment risk? Sure, it’s easy to latch on and enjoy the ride when certain investments are thriving. And it’s just as easy to steer clear of investments that are struggling.

As one of the world’s most successful investors, Warren Buffett, once said, though be fearful when others and greedy and greedy when others are fearful. It’s critical to remember that markets are cyclical, so no matter how good (or bad) they’re doing, they won’t stay that way forever. Again, make sure to consult a financial professional if you’re wondering about how to design an investment strategy that accommodates the goals within your financial plan.

“I see a lot of people pouring most of their money right back into that business to try to grow that business. I don’t necessarily think that’s a bad thing, but it sometimes prevents people from focusing on saving outside of the business as well.” – Dean Barber

Here’s another thing to keep in mind with retirement planning for self-employed individuals and small business owners. You need to build that business with the idea that you’re going to sell that business at some point in time. If you’re going to be putting money back into the business and don’t about selling it and how you’re going to make it marketable, then it doesn’t make sense to just pile all your money back into the business.

“Most small business owners aren’t thinking that way at the beginning. But as they start to accumulate some wealth and understand that their business is growing, they need to rethink it because there are consequences for not doing so.” – Bud Kasper

8. Maximizing Contribution Limits

We touched on contribution limits a little bit earlier when discussing SEP IRAs. No matter what retirement account you have, make sure that you’re maximizing your contribution limits. If you remember from late last year, we received some welcomed news that most contribution limits increased for 2023 due inflationary adjustments. So, be sure to check on how much you’re contributing to your retirement accounts and maximize your contributions.

9. Minimize Debt

As we wrap up this discussion on retirement planning for self-employed individuals and small business owners, we’ll shift gears from maximizing contribution limits to minimizing debt. Being debt-free in retirement is a big goal for a lot of people and understandably so. There are quite a few examples of debt that you don’t want to carry into retirement if you truly want to retire with clarity and confidence.

“Most people need to get a relationship with a bank to bring in an infusion of money from time to time to continue to build their business.” – Bud Kasper

There are actually a few examples of good debt, too, though. Take your mortgage, for instance. It’s not going to inflate, so that could be manageable debt to pay off in retirement. But overall, minimizing debt is no doubt an important step in retirement planning for the self-employed and small business owners.

If you’re concerned about the amount of debt that you could be taking into retirement and are trying to mitigate it, check out our Retirement Plan Checklist. It consists of 30 yes-or-no questions and includes a timeline of things to consider leading up to retirement and various age-based milestones to keep in mind. Download your copy below!

Retirement Planning Self-Employed

Retirement Plan Checklist

10. Review Your Financial Plan and Update It Accordingly

Building a comprehensive financial plan is where it all starts with retirement planning for the self-employed. But that’s not where it ends. Because comprehensive financial planning doesn’t end. It’s critical to understand that as your life changes, your plan needs to change as well. That’s why we encourage people to review their plan at least twice a year and adjust it as needed based on any modifications to your goals, income, and significant life events.

A Key to Retirement Planning for Self-Employed Individuals and Small Business Owners

It can be easy miss some of those things when building or reviewing your plan if you’re a DIY retirement planner. Working with a team of professionals is critical, especially with retirement planning for the self-employed and small business owners.

“Take the time to work with a CFP® Professional. Better yet, work with a CFP® Professional that has a CPA on their team. Because as a self-employed individual or small business owner, there are many tax savings opportunities. That can make a huge difference in your ability to plan effectively for retirement.” – Dean Barber

If you have questions about retirement planning for self-employed individuals and small business owners, let us know. We can go through those questions during a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals. Click here to see our schedule and schedule a meeting. You have the option to meet with us in person, virtually, or by phone. We look forward to further discussing retirement planning for self-employed individuals and small business owners with you very soon.

Retirement Planning for Self-Employed Individuals and Small Business Owners | Watch Guide

00:00 – Introduction
01:36 – The Self-Employed Mindset & Starting Early
06:00 – Types of Retirement Plans for Self-Employed
07:38 – TRIVIA – How Many Americans Are Self-Employed?
08:35 – Back to Types of Retirement Plans for Self-Employed
12:20 – Considering Disability Insurance
12:55 – Reinvesting or Saving Outside of the Business?
17:51 – Managing Your Debt
18:26 – Resource for Self-Employed & Small Business Owners
20:16 – What Did We Learn Today?

Resources Mentioned in This Episode


Previous Shows


Schedule a Complimentary Consultation

Click below to get started. We can meet in-person, by virtual meeting, or by phone. Then it’s just two simple steps to schedule a time for your Complimentary Consultation.

Schedule a Meeting

Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.