As you know, there are many great ways to save for retirement by leveraging real estate. But what if there exist other strategies to save for retirement, specially made for self-employed individual like yourself, to complement your real estate portfolio?
In this blog post, I will cover 5 tips for self-employed real estate agents to save for retirement in a smart way.
1. Establish A Retirement Account:
Open a tax-advantaged retirement account, such as a Solo 401(k) or a SEP IRA. These two accounts allow for higher contributions compared to Traditional IRAs. They provide tax benefits and an opportunity for employer contributions to increase your deductions. To read up on 5 retirement account options I recommend for business owners, click here.
2. Save Consistently and Maximize Contributions:
Regular Contributions: Try to schedule your contributions to your retirement account systematically, in a way that aligns with your budget and income. Regular contributions, even small ones, can compound significantly over time. You can also “set it and forget it” so the habit of saving remains there, even if you don’t remember to send your contribution in.
Maximize Contributions: Try to max out your contributions to your retirement accounts. This not only helps you save for the future, but also lowers your tax liability tremendously! For example, self-employed individuals can contribute up to 25% of their net earnings, up to a certain limit, to a SEP IRA. For a solo 401k, a self-employed individual can contribute up to $66,000 for 2023. That’s a lot of deduction potential!
3. Diversify and Monitor Investments:
Diversification: Create a diversified investment portfolio based on your time horizon and risk tolerance. A mix of assets, such as stocks and bonds, spreads the risk and potential for returns. Throw your real estate portfolio in there, as well, and you’re even more diversified.
Regular Rebalancing: Review your portfolio regularly and rebalance as needed to maintain the desired asset allocation. Adjustments should be made based on changes to your financial plan and changes to your ever-evolving risk tolerance. Your advisor can help with this!
4. Optimize for Tax Efficiency:
Tax deductions from retirement accounts are GREAT, but it’s also important to consider Roth options. It might make sense to save into a Roth account and forego the immediate tax deduction, so your retirement dollars grow tax free for life. It’s important to talk with an advisor to weigh the pros and cons of saving into a Traditional or Roth style of account.
5. Schedule Regular Reviews and Adjust Your Plan, As Needed:
Scheduled Financial Check-Ins: Schedule regular reviews to assess progress, make adjustments based on changing circumstances, and ensure the retirement plan stays on track.
Adjustments After Life Events: Make specific adjustments after significant life events, such as changes in income, expenses, or family situations. Reassess the retirement plan to accommodate these changes effectively.
By focusing on these 5 Retirement Saving Tips, you can establish a strong foundation for your retirement savings, while keeping in mind tax efficiency, diversification, and consistent growth over time, especially as your life changes. To meet 1:1 with an advisor, check out my website here.
A diversified portfolio does not assure a profit or protect against loss in a declining market.