Everyone has to save for retirement.

If you have a job with a company that offers retirement savings, you are in luck. You sign up (or you might be enrolled automatically) and then contribute through your paycheck. You don’t have to do a thing.

But when you’re an independent entrepreneur, you have to come up with your own plan.

About 16 million Americans were self-employed as of July, according to the Bureau of Labor Statistics, but when you factor in both self-employed Americans and the people who work for them, the figure is about 30% of the workforce.

Self-employed people and small business owners should be concerned about their retirement savings, since just 13% of those tax filers participate in a workplace retirement plan.

There’s good news for those self-employed folks: It’s not that different from participating in a company 401(k) plan or 403(b). There is one catch, however. You need to set up the savings on your own and be disciplined about stocking it with cash.

Think taxes
Not saving for retirement, of course, means you are paying more in taxes than you need to.

“The government has incentivized saving,” said Chad Parks, founder and CEO of the retirement plan provider Ubiquity Retirement and Savings in San Francisco.

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An easy calculation you can make to help you understand how this works, Parks says, is to imagine someone who pays around 30% of their salary in taxes.

If this person can set aside $1,000 a month, $300 of that is the money that would otherwise have gone to taxes, Parks said. “The out-of-pocket is only $700 to be able to save $1,000,” he said. “I call it the government match.”

Pick a plan
The choices of retirement plans can seem overwhelming.

“The real differentiator is, can you save more than $500 a month?” Parks said. A monthly amount makes it understandable, so you can compare the number to other fixed expenses.

That $500 adds up to $6,000 over a year, the individual retirement plan limit for 2020. If you’re older than 50, you can save $7,000.

Opening an individual retirement account is the simplest thing to do and, if you’re not going to save more than $500 a month, it’s a good choice, Parks says.

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