How to plan for retirement if you're self-employed

• About 54 million Americans don’t have access to a workplace retirement plan — either because they’re self-employed or their employer doesn’t offer a plan.¹
• Target Date ETFs can help freelancers, gig workers and independent contractors save for retirement simply and affordably.
• iShares® LifePath® Target Date ETFs are actively managed so investors can have confidence their savings are being invested using the same tools and techniques as some of the biggest 401(k) plans.

Yes, retirement planning is one more thing on the “to-do” list when you’re an independent contractor, gig worker, small business owner, or “solopreneur”. The key is to create a system for success in your retirement planning, ideally something easy to set up and monitor, so you can focus on your career.

There’s both good and less-good news for the self-employed. The good news is there are several retirement options for the self-employed, which may even allow you to save more money than if you were in an employee-sponsored plan like a 401(k).

So how much can you contribute to retirement plans if you’re self-employed? Here is a snapshot of various options available to help self-employed Americans save for retirement, and their respective contribution limits.

Fig 1: DIY retirement savings plans²

The less-good news is the ability to prepare for retirement greatly depends on the tools available to workers. The approximately 54 million Americans³ who don’t have access to a workplace retirement plan — either because they’re self-employed or their employer doesn’t offer a plan — are less likely to save and invest for retirement vs. those who do.⁴ Also, we’ve found the median independent saver has 40% less in their retirement/investment accounts than workers with access to a 401(k) or similar plan.⁵

Meanwhile, 66% of workers worry they’ll run out of money in retirement.⁶

Stress can lead to paralysis, so the most important step is the first one. Just thinking (or reading) about saving for retirement is a positive. From here, consider these three basic steps:

1. Open a retirement account at the brokerage of your choice, ideally one with low fees, an option to buy fractional shares, and the ability to set up automatic deposits.
2. Set up automatic deposit, a critical component of any retirement savings plan. Workers are 20 times more likely to save and invest for retirement if their contributions are automatic.⁷ The iShares Investment Growth Calculator demonstrates what you could potentially earn from recurring investing in just a few steps.
3. Rebalance your portfolio annually to help ensure no individual stock or asset class dominates your holdings. In other words, rebalance to avoid putting all your eggs in one basket.

iShares LifePath Target Date ETFs are a powerful combination of the target date investing strategy and ETF technology. With one decision to invest, you get a single fund that provides diversification, automatic rebalancing, and risk management with none of the work.

Target Date Funds are a time-tested strategy that can help make retirement investing easier, more affordable, and more accessible for retirement planners of all ages. Select the fund closest to your target retirement date (a.k.a. your “vintage”) and contribute regularly.

And iShares LifePath target date funds are designed ‘for’ retirement, not just getting ‘to’ retirement. They are professionally managed to evolve a diversified portfolio of assets over time, taking on more risk early on and gradually becoming more conservative as the target retirement date approaches. This helps balance growing your investment while managing risk, with the goal of enabling you to maintain consistent spending through retirement.⁸

Here some of the top ways iShares Target Date ETFs can help make retirement investing easier, more affordable, and more accessible for savers of all ages.

• A Simple Solution: With one decision to invest in a target date ETF, you take away the work of changing asset allocations or adjusting your strategy as retirement nears. Just steadily add to your investments, and the allocations will adjust over time. As you make more income over the course of your career, adjust your savings — not your spending — to grow your accounts even more.
• Professional Management: Target Date ETFs are actively managed so investors can have confidence their savings are being invested using the same tools and techniques as some of the biggest 401(k) plans. Select the fund closest to your target retirement date (what we call your “vintage”) and contribute regularly. As you near the target date, the fund is designed to roll into a retirement vintage, which seeks to enable investors to maintain consistent spending through their retirement. Read more about how much do you need to retire?

BlackRock pioneered target date funds and we know from over 30 years of experience that our LifePath Target Date funds can help make retirement investing easier.

• Low Costs: ETFs are often available commission free, generally have low expense ratios and no hidden fees. They also tend to be tax efficient, historically limiting capital gains distributions, helping investors keep more of what they earn.⁹
• Easy Access: ETFs trade on stock exchanges, so they’re easily bought or sold throughout the trading day.

We believe the combination of target dates and ETFs in the new iShares LifePath ETFs can help all investors prepare for retirement. But they’re especially helpful to those savers who want to do more but don’t have access to a workplace plan or don’t know where to start.