Plan retirement as a business owner or independent contractor. Compare SEP-IRA, Solo 401(k), and SIMPLE IRA options with your projected savings.
Projected at 65
$8.1M
Required corpus
$1.8M
Status
On track
Self-employed individuals have several powerful options. A Solo 401(k) allows up to $69,000 in annual contributions (2024) and offers a Roth option. A SEP-IRA is simpler to administer and allows up to 25% of net self-employment income. A SIMPLE IRA works well if you have a few employees. The right choice depends on your income level, whether you have employees, and how much administrative burden you want.
Self-employed professionals often have higher incomes and higher tax rates, making tax-deferred retirement accounts especially valuable. Every dollar contributed to a SEP-IRA or Solo 401(k) reduces your taxable income. At a 32% marginal rate, a $50,000 contribution saves $16,000 in taxes. This tax savings alone compounds into significant additional wealth over a career.
Think of retirement savings as a business expense, not a personal luxury. Set up automatic transfers from your business account to your retirement account each month. Many successful self-employed professionals treat retirement contributions like payroll — it happens before any other discretionary spending. A good target: save the equivalent of 25% of your net income between all retirement vehicles.
Required corpus = Annual retirement expenses ÷ 0.04 (the 4% rule)
This calculator estimates your required retirement savings using the 4% safe withdrawal rate. It projects your current savings forward with compound growth from monthly contributions and investment returns, then compares the projection to your required corpus. The chart shows whether you're on track to meet your retirement goal.
A 30-year-old earning $6,000/month, contributing $2,500/month to retirement, with $30,000 already saved at 7% return: by age 65, the portfolio projects to approximately $3.8 million. If retirement expenses are $4,000/month ($48,000/year), the required corpus is $1.2 million — well on track. But if they wait until 40 to start with the same savings, they'd only reach about $1.5 million.
Adjust the retirement expenses slider to reflect your expected lifestyle — not just your current expenses. Healthcare costs typically increase significantly in retirement.
If the projection shows a gap, try increasing your monthly contribution by even $200. Small increases early have outsized impacts due to decades of compounding.
Don't forget Social Security income. While this calculator shows the full amount you need saved, Social Security may cover 20-40% of retirement expenses for many Americans.
Run this calculator annually as your income and savings change. The earlier you spot a shortfall, the easier it is to correct.
If you're behind, focus on the three levers: increase contributions, delay retirement by a few years, or reduce planned retirement expenses.