We Need to Talk About Retirement, Freelancers

By Sallie Krawcheck

Updated for the 2023 tax year.

Striking out on your own as a freelancer can be liberating. You get to ditch the wool suits and heels for yoga pants; office politics and inflexible schedules are a thing of the past; and you can fill your day with projects that genuinely excite you. What could be better than that?

It’s now on you to be in full control of your current — and future — finances so that you can have that yoga pants-feeling well into retirement. Budgeting may be your BFF, but it only gets half of the job done.

Even though freelancing can be an unpredictable business, it doesn’t mean that saving for retirement should be too.

Research shows that women who’ve gone the freelance route earn less than salaried women. Taking the gender pay gap and the fact that more than half of the 53 million freelancers in this nation are women into consideration, that’s pretty concerning because it can leave many women seriously unprepared for retirement.

So what’s a self-employed woman to do? If putting part of your paycheck into a barely-earning-interest savings account and hoping for the best is how you’re saving for retirement, then you’re selling Retired You short.

I know…planning for the future while freelancing sounds as easy as getting an invoice paid on time. After all, some gigs will bring fatter paychecks than others, and sometimes you end up spending more time between gigs than expected. But once you’ve built an emergency fund that covers three-to-six months of living expenses and paid off any credit card debt, it’s time to set your sights on retirement. Because even though freelancing can be an unpredictable business, it doesn’t mean that saving for retirement should be too.

Bill your client for your retirement

Your time is valuable, so make sure you’re billing for what you, your time, expertise, and services are really worth. This is more than settling on an hourly rate that covers your immediate needs — like rent, bills, and groceries — especially since research shows that the gender pay gap widens for self-employed women.

Don’t get me wrong: You can definitely use your needs as a starting point for calculating your hourly rate. To do this, we recommend outlining how much money you need each month for your different obligations. (You can see an example here.) This also includes contributions to your retirement account(s). Now, you’re probably wondering how much money you should set aside for your retirement each month. We’ll get to that part of your planning-for-the-future process in just a sec.

Once you add up those numbers and get your monthly total, divide it by the hours you expect to work each month to arrive at a starting point for your hourly rate. This is your baseline, worst case scenario hourly rate. Because, as you probably noticed, this approach doesn’t take into account your experience, your industry, the demands of the project, or the fact that you’ll probably want spending money too. So after you get your baseline hourly rate, do some research to get a sense of how much more you can charge given your line of work and expertise.

Be a woman with a retirement plan

When you left your company, you also left your 401(k) plan and any match your old company had. But as a freelancer, you have several other options for retirement accounts, including individual retirement accounts (IRAs) and a 401(k) specifically designed for self-employed individuals. It really comes down to your desired contribution level, tax benefits, and income level.

Traditional IRA

First option is a traditional IRA. With these, you contribute pre-tax earnings into your account and don’t have to worry about giving Uncle Sam a single penny until you withdraw that money down the line. Actually, Uncle Sam is the one giving you money here — at least temporarily. Since you aren’t covered by a retirement plan through work, your annual contributions to a traditional IRA may be completely tax-deductible. This reduces your tax liability for the year, potentially leaving more money for you to invest toward your retirement.

But as we like to say here at Ellevest, there’s no such thing as a free lunch. So the potential drawback of a traditional IRA? You could end up paying more in taxes when you do eventually withdraw your money if you’ve moved into a higher income bracket or if the government has raised tax rates by that time.

Roth IRA

A Roth IRA treats taxes differently than a traditional IRA. With a Roth, you pay taxes on whatever you contribute off the bat. So you don’t reduce your tax liability for the year, but you also don’t ever have to pay taxes on that money again. The amount in the account when you retire is all yours.

However, unlike traditional IRAs, Roth IRAs come with income requirements. If you fall within these income requirements, can afford to pay taxes on the outset, and/or anticipate that your tax rate will be higher down the line (because you expect to make more money), a Roth IRA could be a great option for you. But since we have no way of knowing what tax rates will look like in the future, having retirement accounts that treat taxes differently (e.g., both a traditional and Roth IRA) isn’t a bad thing.

You can contribute a combined maximum of $6,500 per year — or $7,500 if you’re 50 years old or older — to all of your traditional and Roth IRAs. Now for your monthly rate calculations: $6,500 divided by 12 is $542(ish). That’s how much you should factor into your monthly rate if you decide to go either the traditional or Roth IRA route. If you’re 50 or older, your retirement savings target is $625 per month.

Simplified Employee Pension Individual Retirement Account (SEP IRA)

Another option is a SEP IRA, where you can contribute a max of 25% of your earnings, up to $66,000, annually. Clearly that’s a lot higher than the annual contribution limits on a traditional or Roth IRA, which is why it can be a great option for high-earning freelancers.

As with a traditional IRA, SEP IRA contributions are tax-deductible — and your earnings grow tax-deferred, so you don’t pay taxes on the money you make until you withdraw it.

Let’s say freelancing is treating you well (extremely well, really) and you want to max out your SEP IRA this year. Here’s what the math looks like: Divide $66,000 by 12, and you get $5,500. So we’d recommend accounting for that in your monthly rate if you want to max out your SEP IRA.

Solo 401(k)

Also called the one-participant 401(k) or Individual 401(k), a solo 401(k) is the same as a traditional 401(k) offered by an employer to its employees. Translation: You can contribute to your plan as both the employer and employee.

Your contributions are pre-tax, so you’ll end up paying taxes when you withdraw your money later. As an employee, you can contribute a maximum of $22,500 annually ($30,000 if you’re 50 or older). As an employer, you can throw in 25% of your business’ earnings, though you'll have to do some math to figure out your deduction limit. As with the SEP IRA, your total contribution — both as employer and employee — maxes out at $66,000 overall.

The math here is the same as with the SEP IRA, too, so we’d recommend allocating $5,500 of your monthly rate toward retirement savings to max out your solo 401(k).

Put your money where your future is

It can be hard — ok, maybe terrifying — to put aside some of today’s paycheck when you don’t always know how or when you’re going to get your next one. This is where your emergency fund comes in handy because it can make the occasional lag time between projects less nerve-racking. And I can’t stress this enough: By factoring retirement savings into your rate, you’ll make it easier to save because you’ve already earmarked some money for your retirement account(s).

If you’re nervous about keeping yourself on track with your retirement savings or think it sounds too involved, set up automatic deposits for your retirement account(s). At Ellevest, you can set up bi-monthly, monthly, and quarterly deposits to your IRA. You can build up your retirement savings without even thinking about it.

But what if your income is really variable? Doesn’t that make planning for the future difficult?

Maybe, but every little bit counts…especially the sooner you start. You can thank compounding — which gives you the opportunity to earn returns on your contributions, and even returns on those returns — for that.

So rather than focusing on a specific dollar amount, perhaps shoot for a fixed percentage of each paycheck. It’s less stressful than trying to stretch a smaller paycheck, and you’re still getting into the habit of saving regularly for retirement.

Generally, we recommend putting 20% of your income toward investing for long-term goals, including retirement; but if 10%, or even 5%, is what’s realistic right now, stick with that and work your way up as your rate rises.

Let’s face it: You like working for yourself. That’s why you took the plunge by going freelance. But you shouldn’t forget that you’re working for Retired You too. If you don’t, you may have to work longer than you want, instead of spending your kick-a$$ retirement years poolside with a cocktail.


© 2023 Ellevest, Inc. All Rights Reserved.

All opinions and views expressed by Ellevest are current as of the date of this writing, are for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.

Information was obtained from third-party sources, which we believe to be reliable but are not guaranteed for accuracy or completeness.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities, and should not be considered specific legal, investment, or tax advice.

The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person.Investing entails risk, including the possible loss of principal, and past performance is not predictive of future results.

Ellevest, Inc. is an SEC-registered investment adviser. Membership fees and additional information can be found at

A newsletter you’ll love

Get all the news, advice, and must-know info on women, money, and career.

Sallie Krawcheck

Sallie Krawcheck is the Founder & CEO of Ellevest.