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How to Build a Retirement Plan for Self Employed People (Including Expats)
Hoxton Blog • How to Build a Retirement Plan for Self Employed People (Including Expats)
Self-employed people do not receive automatic employer pensions, so they need a clear, personal retirement plan. This guide explains the main plan options, how to choose between them, and how to set contributions and tax strategies that work with irregular income. It also covers extra points for expats, such as cross-border tax, currency, and pension rules.
Why Retirement Planning is Different When You Are Self-Employed
Employees often have access to workplace pension schemes with automatic enrolment, employer contributions, and simple defaults. Self-employed people have more freedom but also more responsibility.
There is no employer setting up a plan, matching what you pay in, or nudging you to save regularly. Income may also vary from month to month, which can make it hard to know how much to commit.
Recent research by PensionBee found that only around 16% of self-employed people in the UK currently pay into a private pension, compared with far higher participation among employees under automatic enrolment.
For self-employed expats, there are extra layers. You may earn in one country, keep pensions in another, and be taxed in both, depending on residency and double tax treaties.
This makes it even more important to choose the right types of retirement accounts, understand the tax effects, and build a plan that can adapt as your location and income change. In this article, you will see how to do that step by step.
Why Listen to Us?
Hoxton Wealth works with self-employed professionals and business owners around the world, including freelancers, consultants, and entrepreneurs with UK, U.S., and other international ties.
The team helps clients choose and coordinate retirement accounts such as SIPPs, UK personal pensions, U.S. Solo 401(k)s, and IRAs, and integrate these into broader cross-border plans. This experience informs the practical guidance in this article on building a retirement plan when you work for yourself.
What Are Your Retirement Plan Options as a Self-Employed Person?
Self-employed people often have many of the same types of tax-advantaged retirement plans as employees, plus a few that are specifically designed for business owners. The main options in the U.S. system include:
- Solo 401(k)
A retirement plan for a business owner with no employees other than a spouse. You can contribute as both “employee” and “employer,” which allows higher total contributions at a given income level. - SEP IRA (Simplified Employee Pension)
A flexible plan where the business makes contributions for the owner (and any eligible employees) as a percentage of compensation. It is popular with people who have uneven income, because contributions can vary by year. - SIMPLE IRA (Savings Incentive Match Plan for Employees)
A plan for small businesses with employees. It has simpler rules than some other plans, but lower contribution limits than a Solo 401(k). - Traditional and Roth IRAs
Individual accounts that allow contributions up to annual limits, separate from employer or business plans. Traditional IRAs can give tax deductions today, while Roth IRAs can provide tax-free withdrawals in the future, subject to rules. - Keogh Plans
Plans for self-employed people and partnerships, including defined contribution and defined benefit versions. They may suit larger self-employed businesses that want higher or more structured contributions, but they usually involve more complexity.
In general, these plans offer tax advantages such as tax-deductible contributions, tax-deferred growth, or tax-free withdrawals in the case of Roth arrangements. The right mix for you depends on your income, whether you have employees, and where you live and pay tax.
What Are the Benefits of the Right Retirement Plan for a Self-Employed Person?
Setting up and using a suitable retirement plan brings several advantages:
- Tax Savings
Contributions to plans like Solo 401(k)s, SEP IRAs, and some UK pensions can be deductible, which can reduce your current tax bill while you save for the future. - Financial Security
Formal retirement plans encourage regular saving and investment, which helps build assets that can support you when you decide to work less or stop working. - Flexible Contributions
Many self-employed plans allow you to adjust contributions year by year, which can match irregular income patterns. - Higher Contribution Limits
Plans such as Solo 401(k)s, and some Keogh or defined benefit arrangements can allow much higher contributions than basic individual accounts, especially at higher incomes. - More Control
Because you choose the structure and contributions, your plan can match your goals, rather than being limited by an employer scheme. - No Employer Dependency
You are not reliant on staying with one employer to build up pension rights, which can be helpful if you change direction or location often.
Step-By-Step Guide to Creating Your Self-Employed Retirement Plan
Step 1: Assess Your Current Financial Situation
Start with a clear picture of where you are today. List:
- Current savings and investments, including any old workplace pensions or personal pensions.
- Business income, noting that it may be irregular across months or seasons.
- Debts, such as business loans, credit cards, or mortgages.
Then look at your current tax position. Knowing your marginal tax rate helps you see the value of tax deductions from plan contributions and whether it might help to shift more income into a tax advantaged account.
Next, define your retirement goals in simple terms. Ask yourself:
- When would you like to reach financial independence or reduce work?
- Where do you expect to live in retirement?
- Roughly how much income might you want per year, in today’s money?
Hoxton Wealth’s articles on “How the Cost of Living Can Impact Your Retirement” and “How to Define Your Retirement Lifestyle and Financial Needs” can help you turn lifestyle ideas into approximate numbers.
Our Retirement Savings Strategies support can then connect those numbers to a savings and investment plan.
Step 2: Choose the Best Retirement Plan for Your Needs
Once you have a handle on your position and goals, you can decide which type or types of plans fit you best.
- Solo 401(k)
Often suited to self-employed people or owner only businesses with no employees other than a spouse. It allows both employee salary deferrals and employer contributions, which can lead to high total limits. It may also offer Roth options for tax-free withdrawals and flexible investment choices. - SEP IRA
Useful if your income is uneven or you want a simple plan that you can fund as a percentage of profits. You make employer-style contributions for yourself (and any eligible employees) without separate employee deferrals, and you can change or skip contributions in weaker years. - SIMPLE IRA
Appropriate for small businesses with employees, where you want a straightforward plan with lower admin. Employees can contribute, and you make a required match or fixed contribution. - Traditional And Roth IRAs
These can sit alongside business plans and are often used when you want to add extra savings or when you do not yet want to set up a business plan. Roth IRAs may be particularly attractive if you expect to be in a higher tax bracket later. - Keogh Plan
This might suit larger self-employed businesses or partnerships that want to make higher contributions or use a defined benefit formula. However, administrative and actuarial requirements can be higher, so this is usually best discussed with a planner and tax adviser.
Expats also need to consider how local tax rules and treaties treat these plans and any UK or other pensions they hold.
Step 3: Maximise Your Contributions
Once you have picked your main plan type, work out a realistic contribution strategy:
- Aim to Use Available Limits
Understand the current contribution limits for your chosen plan and aim to contribute as much as your cash flow and tax position allow. Higher contributions can make a large difference over time because of compounding. - Use Catch Up Contributions if Over 50
Many systems allow higher limits once you reach age 50. If this applies to you, consider increasing contributions so you can close any gap more quickly. - Contribute Regularly, Even if Amounts Vary
If income is uneven, you might set a base monthly contribution that feels comfortable, then add top ups in stronger months. The important part is to keep money flowing into the plan over time rather than waiting for a “perfect” year. - Coordinate Across Accounts
If you have both a Solo 401(k) and an IRA, or a UK SIPP and other local accounts, decide how to spread contributions based on tax relief, flexibility, and your long-term plans. A structured approach from Hoxton Wealth’s Retirement Savings Strategies service can help you prioritise.
Step 4: Consider Additional Tax Strategies
Beyond simply choosing a plan and contributing, tax strategy can help your savings work harder:
- Tax Deferred Versus Tax Free Growth
Balance pre-tax accounts (where you deduct contributions now and pay tax later) with tax-free accounts such as Roth arrangements (where you pay tax now and withdraw later without further tax, subject to rules). This mix can give you more flexibility in retirement income planning. - Use Deductions and Credits for the Self-Employed
Self-employed people may be able to deduct plan contributions, certain health insurance premiums, and other business expenses, which together can improve cash flow. Check which options apply in your country and how they interact. - Plan for Cross-Border Tax
If you are an expat, consider how home and host country taxes treat your contributions and withdrawals. Double tax treaties can sometimes prevent the same income from being taxed twice, but details matter.
Step 5: Automate Your Savings
Automation can be very helpful when income varies, and there are many demands on your time:
- Set Up Automatic Contributions
Use direct debits or standing orders from your business or personal account into your chosen retirement plan. Even modest monthly amounts build discipline and can be increased when business performance allows. - Align With Your Cash Flow
If you bill clients on a regular cycle, align contributions with that pattern. For example, you might set a percentage of each month’s net income to go into your plan. - Review Annually
Each year, review your automated amounts. If your business has grown, increase contributions; if it has been a harder year, adjust without stopping completely.
Hoxton Wealth’s retirement planning and savings services can help you connect these automated payments with a broader plan so that you know how much you should aim for and how often to review.
Best Practices for Managing Your Self-Employed Retirement Plan
- Start Early
The earlier you begin, even with small contributions, the more time your money has to grow, and the less pressure you face later. - Review Regularly
Check your plan at least once a year to review contributions, investment performance, and whether you are still on track for your goals. - Diversify Investments
Avoid relying on a single asset or sector. Use diversified funds or portfolios that spread risk across markets and asset classes. - Make the Most of Any Employer-Style Contributions
If you later take part-time employment alongside self-employment, do not ignore any employer plan and contributions that may be available. - Work With a Cross-Border Planner
For expats or those with international ties, regulated advice from a firm such as Hoxton Wealth can help coordinate pensions, tax, and currency across countries.
Conclusion and Next Steps
Building a retirement plan as a self-employed person means taking on responsibility that an employer would otherwise manage, but it also gives you more control. By understanding your account options, choosing a structure that fits your income and goals, maximising contributions within your means, using tax rules wisely, and automating saving, you can create a solid foundation for later life.
For self-employed expats, weaving in cross-border tax, currency, and pension rules makes planning more complex, but also more important.
Hoxton Wealth supports self-employed clients around the world with coordinated Retirement Savings Strategies and Retirement Income Planning that reflect where they live now and where they plan to retire.
If you would like help building or reviewing your own plan, you can contact Hoxton Wealth to discuss your situation and next steps.
FAQs
Building a retirement plan as a self-employed person means taking on responsibility that an employer would otherwise manage, but it also gives you more control. By understanding your account options, choosing a structure that fits your income and goals, maximising contributions within your means, using tax rules wisely, and automating saving, you can create a solid foundation for later life.
For self-employed expats, weaving in cross-border tax, currency, and pension rules makes planning more complex, but also more important.
Hoxton Wealth supports self-employed clients around the world with coordinated Retirement Savings Strategies and Retirement Income Planning that reflect where they live now and where they plan to retire.
If you would like help building or reviewing your own plan, you can contact Hoxton Wealth to discuss your situation and next steps.
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