As a freelancer, you have full and total control over your work. You decide what you do, where you do it, and how you get things done. The freedom and autonomy are attract many workers to self-employment in the first place. But if you already freelance, you know this line of work doesn’t come without a downside.

The biggest might be that you are solely responsible for your finances — both now and in the future. As an employee, you may have access to employer benefits and employer-sponsored retirement plans. They may even come with a matching contribution. But as a freelancer, you’re on your own. You have to plan for the money you’ll need in the future and to do all the saving for it. The best thing you can do for your freelance career may be considering what happens when it comes to an end.

What Are Your Options for Retirement When You Freelance?

One of the biggest downsides of freelancing is the fact that for many self-employed individuals, “not working” means “not making money.” You already know this if you have to plan around time off (since you don’t have an employer who still pays you when you take vacation days.) Retirement will work similarly — but instead of planning for a week or two, you need to think about planning for years, or even decades, without income.

That might sound daunting, but the solution is actually simple. You need to look at your options for creating income streams that generate money even when you’re not putting in billable hours via your freelance career. Some of those options could include:

Developing a business model that allows your work to continue and earn money without your direct involvement. Maybe you could license your work to earn royalties, or develop passive income streams. You could go from freelancer to business owner with some extra work and planning.
Selling your book of business. When it’s time to retire, you could sell your book to another freelancer or business owner. You then need to carefully manage the profits from that kind of sale. For example, investing the cash will allow you to continue building your wealth.
Establishing a Retirement Plan. As a self-employed individual you have a number of options for saving for retirement. No matter what retirement plan you set up, though, the key is contributing to it regularly. The earlier you start to save for retirement, the more compound interest will feed your nest egg.
Transitioning to part-time work. Many freelancers love the work they do, and completely retiring from their careers may leave them feeling unfulfilled or bored. You can always plan to keep doing some work in your retirement, being selective about the jobs you take or working as a consultant. Any income you earn from that can supplement things like your investments or savings nest egg so those last longer.

Note that these are simple, straightforward solutions. Any freelancer can use them, but that doesn’t necessarily mean they’re easy to execute. It takes a lot of hard work and considerable planning to grow wealth with your investments or to build a business that you can later sell. It is possible, though, and it’s easier if you start thinking about this now rather than waiting until you’re ready to retire!

Questions to Think About and Answer About Retiring from Freelance Life

As you start planning, you’ll need to answer some important questions about your preferences, your lifestyle, your finances, and your work. Here’s what to consider:

How long can you (realistically) work?

Again, some freelancers love their work and don’t want to retire — but never retiring isn’t realistic, no matter what kind of work you do. What happens if something happens and you can’t work? What if you face age discrimination in your field? (Age discrimination is illegal, but unfortunately it still happens.) Obviously these aren’t best-case scenarios, but that’s the point: your planning shouldn’t be based on the best-case. Plan for the worst-case scenario so you can be prepared for whatever comes your way.

Understanding how long you can realistically work will help you determine two important things:

The number of years you’ll be able to continue earning an income and contributing to your nest egg
The number of years that wealth may be needed to fund your life once you stop earning an income

How much can you save and invest?

This is an important question to consider because as a freelancer, your income probably isn’t the same from month to month. Those fluctuations can dissuade you from putting cash into savings and investments because you are worried about having a low-earnings month in the near future.

Rather than focusing on a fixed amount, commit to saving and investing a percentage of your income. Simply deduct 10% (or more) from your income each month. Then you can spend the remainder of your earnings on other budget items. One of the the biggest mistake freelancers make is putting savings in the discretionary part of their budget. It belongs in with the bills: mortgage, car payment, retirement savings.

And when you have really good, high-earnings months? Consider trying to save a higher percentage to make up for times where saving anything feels impossible because you only earned enough to break even on expenses. You don’t want to be part of the 45% of working-age households that don’t have any retirement savings at all.

Where are you saving and investing?

An important follow-up to how much is where you put the money you manage to set aside for your future. You might not have a 401(k), but you do have access to lots of self-employed retirement plan options that can make a big difference to whether or not you’re able to retire when you want. Here are some of your options:

Traditional IRA
Roth IRA
Simple IRA
SEP IRA
Solo 401(k)

The Solo-401(k) is a popular option if you have no employees other than a spouse, as it allows you to “borrow” your own money, at a low interest rate, if need be in a pinch, or for the purchase of a primary residence.

You can click here to read more about retirement plan options for the self-employed, including more detailed information on a Solo-401(k) Plan.

Make sure you talk to a financial planner who can help you choose the best retirement plan option for your specific situation, which will depend on your income, your goals, and what other income sources you might rely on to fund your future retirement.

Regardless of what approach you might want to take to plan for your retirement, all freelancers should make use of self-employed retirement plans. This will help you save for the future you want in a tax-efficient way.

Lastly, don’t forget how choosing the right investments for your retirement savings can make all the difference in the world in how much you will have available to you in the future to live your desired retirement lifestyle. Following the herd and just buying a low cost index fund isn’t always the best option. Get professional investment advice from a fee-only registered investment advisor.