How to Save for Retirement If You're Self-Employed: No 401(k), No Problem

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2:53That's the power of us. Equal housing lender. Member FDIC. Trademark 2025 U.S. Bank. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

3:16When you're making your financial plan, there is a very, very important person that you always need to keep in mind. Your future self who deserves an awesome, dreamy retirement. Today, I'm talking to a money rehabber who wants to make sure they're on track for retirement. So today we talk about the different ways to reverse engineer your retirement goals and the different retirement accounts that can help get you there. Plus, I also give her my recommendation for which company to use when opening those accounts. So let's get into it.

3:45Stephanie, welcome to Money Rehab. Thank you. Thank you. I'm excited to be on and talking to you. Well, I'm excited to have you. So I know you have a question about planning your financial future, specifically retirement as a freelancer. And I love this question. It's a really important one, because you might not necessarily have the whole system of a 401k at a company. So tell me a little bit about what you do for work and why retirement planning is hot on your mind. Sure. So I'm a producer of film and theater. Specifically, I work in line producing, which if you're not familiar with that, they're the people on set that tell everybody no, budget wise, probably the least popular, because we have to say no, that's not in the budget.

4:36And so you know, my life revolves around schedules and logistics and budgets. I like that. I think you'd be the most popular person for me. Yeah. Yeah. It's, it's the people that want more money. And it's just like, you know, you can't, you can't rob Peter to pay Paul. Like you just, it doesn't work like that. And invent money. I wish I could. But part of the reason why I feel like it's so important is because like as a freelancer or even just even in this industry, in the film industry, if you're not in specifically the studio system, you don't really have a safety net. And they don't teach you how to plan for the future.

5:15So you're kind of like, unless you get an MBA, which I did get an MBA to help me become a line producer. You're kind of, you're kind of just like stuck out there and you're like, okay, what do I do? And even if you get an MBA, that's not planning for the financial future. That's really just strategizing. I know it drives me crazy. I've gone to speak at MBA programs and I'm like, why do you have me coming in here to teach you guys anything? Like you just spent a hundred thousand dollars for your brain. like, please teach me. But then they remind me that they don't talk about personal finance in an MBA program, which is bananas, but not our problem for today.

5:57Our goal is to help you to create your financial strategy. And I'm assuming you don't have, you're not part of a union. So producers, if I was a unit production manager, I technically, once I got the hours, could be a part of the DGA, which is Director's Guild, but Producers Guild is not a union. It's a guild. And so there aren't nearly as many protections for people who are line producers because they're guild, not union. I don't even know what the difference is. One gives you bargaining power, like a union bargaining power. And the other protects you with some things like some insurance, some help in financial issues, but not a lot.

6:39Okay. So we're on our own. Yes, pretty much. When it comes to retirement. I want to ask you kind of a woo-woo question, but I promise it is helpful. Do you feel stressed, insecure, anxious, maybe empowered about money? Like give me some words when you start thinking about money. As far as current situation, stressed, anxious, spiraling out of control. But it's either feast or famine in the freelance world, you either have way too much work, or you have done. And so it's, it's very, it's scary. Yeah. And it's also I mean, I'm sure when it's feast, you know, it's hard to plan for the famine. And, and, you know, you don't want to think that that's coming.

7:31So live way underneath your means during those periods of time, which is counterintuitive. What was your home situation? Like, what were your parents like with money? Did they have, you know, a similar money mindset? Were they anxious? Were they spendy? So I have two very opposing parents. And by that, I mean, my stepdad spends money like it's going out of style. He is an entrepreneur. He doesn't worry about it. And then you have my mom who is an accountant and she is very good. And she has all of like, she has CPA. She has all of these other things. In fact, she was a, she was a fraud auditor, which I think is amazing and cool.

8:14It's very bad-ass. Yeah. She's a, she's a really, really cool woman. And so she was always like, okay, this is how much we have to spend. And so my home situation was very weird growing up because it was like, I have a stepdad who spends a lot and whenever he wants. And then I have my mom who counts her pennies and puts it away and has an amazing retirement. And because of her putting away an amazing retirement, she and my stepdad have an amazing retirement, but it's because of her. It's not because of him. That's clear. And so do you think you're more like her or more like Kim or that's a combination probably because I could have gone the direction my brother went, which was, okay, we're going to get a stable job that comes with all the bells and whistles of having a very stable job, or there's the entrepreneurship freelance world that would fill my soul.

9:09And you're here. So you got something from your mama. Exactly. You're being proactive. I mean, being proactive about making a financial plan is absolutely going to benefit your relationship with money. I'm so glad that you're taking this so seriously. I think your future self will certainly thank you. So more than half of Americans generally feel like they're behind on their retirement savings. So you're definitely not alone. Let's start by getting a sense of what our current situation is. How old are you? I'm in my forties. So I'm 41. Okay, same. Do you have a sense of how old do you want to be when you retire?

9:45Yeah, if possible, I would love to be 55 or 60, though that that's probably not going to happen unless the project that I've been working on for three years really takes off. And then it's going to be it's going to be great, but it has to take off. So let's hope for the best. And let's say you do retire at 55. Just to map it out, you have 14 years to build up that nest egg. I think a big reason a lot of us feel behind on our retirement savings is because we're not setting our retirement goals up the right way. We need to actually put a label on what we want and what we need. So let's talk about your future self.

10:25When you think about retirement, what do you picture? What's a day in the life of retired Stephanie? Is she balling out on yachts? Is she hanging out in a Target lawn chair? outside of her apartment? Like, what is she doing? Oh, more than likely, I'm sitting in a garden close to water. Like, doesn't matter if it's a lake, doesn't matter if it's a beach, doesn't matter if it's a river, it just needs to be close to water, surrounded by garden. I'm very much a, like, water and earth type person. I don't like camping, let's be perfectly honest. I hate camping, but I love being where, like, I can smell the flowers or I can be close to nature without actually having to deal with the bugs and things that that are naturey.

11:13I'm with you. Okay, so are you living near a garden near water right now? No, actually, I live in the mountains right now in Burbank. Okay. So for retirement, you would be upsizing, I suppose. Yes. I don't know if that's a word, but like upgrading your current situation. So let's put a price tag on that goal. Can you think about all your monthly expenses in this retirement dream house? What the housing would cost? What transportation would look like? I don't know. Do you want to just hang out there, ride your bike? Or will you need a car to get to, you know, the grocery store and whatever? What are your utilities like?

11:58What are your groceries like? Do you want to travel? Do you want to go out for dinner? Do you want to cook? Tell me more. Can we put a number on something like that? Sure, absolutely. I mean, I would love to own a house again. When I was in my 20s, I owned a house and then I got divorced and that throws everything into craziness. And so I would love to own a house. My dream goal would be to be able to put 30 % down on a house. And in Southern California, that's probably about$300 ,000. Cooking a lot at home just because I tend to go Mediterranean style. so um a lot of vegetables things like that hence gardening like being around gardens being able to do things like that um so probably about 700 to 800 a month in food i drive a nine-year-old car now that i absolutely adore because it's a lexus and you know lexuses tend to be decent cars they last a long time they're safe things like that so not I'm not a new car person I'm like as long as it as long as it's decent and it gets me where I need to go I don't need the like crazy stuff you know I want to be able to travel as well but not crazy travel like not yachting around the world more like I just want to be able to go and see places that I haven't been so like in my mind It's not the really, really high-end stuff, but it's not also your budget stuff either.

13:30Does that make sense? Yeah. It's somewhere in between. Yeah. Cool. So this is really, really helpful. Let's talk about your budget now. How much are you spending right now per month on everything? You're the budget lady. You literally went to school for it. You keep other people on set on budget. What is your budget for housing, food, everything? About$42.50 a month. It goes up and down a little bit, anywhere from$4 ,000 to about$4 ,500 a month right now. Okay. And I'm fixing that because I'm moving to a different space that is less expensive, but larger in a different part of Los Angeles. So it makes a whole lot of sense to me.

14:17It's also closer to the water. So you're fixing it, meaning you're improving it or you're having it fixed, not variable. Okay. Yes. I'm improving my budget in that I will spend less on rent in the next year because I'm moving to a different space that will improve my budget by about a thousand dollars. Cool. So it sounds like your dream life and retirement is pretty similar to what you are living on right now. Okay, so let's use that number, your annual burn rate. So your monthly times 12. Let's just use what we have right now. Even though it might go down, it's always better to overestimate than underestimate.

15:04So 51K a year. Does that sound right? Yes. So for retirement, let's assume that you're going to have to spend the same burn rate that you have right now. You're just not going to be working. You need to have that ready to go. So for retirement, let's just assume that you're going to spend the same amount as you are right now, that your burn rate is going to save the same. It sounds like you're going to be upgrading in some areas. It sounds like you're going to be downsizing in other areas. And let's say you want to do that for 30 years. That means that you're going to need$1.5 million to retire if you don't work and you use your same burn rate for 30 years.

15:48So from 55 to 85. How does that sound? I know it's a big number I'll just no it actually I mean because I work in film it doesn't actually sound like I mean that's that's a decent sized film so like to me 1.5 yeah is a decent production like that sounds so crazy but that's what it sounds like to me as a freelance producer yeah we're making the retirement movie of your life lifetime movie no those always end badly so no more of a Disney for Stephanie in retirement land. What do you have saved for retirement right now? About, oh, it's terrible. I only have like$5 ,000 saved right now. I also moved across the country last year, like last summer, I moved across the country.

16:39So I picked up everything from central Texas and moved to Los Angeles. So yes, I have a lot of work. It was a transition time. Yes. Yes. We're going to need more money. Clearly. The first thing to do is to think of how we're going to get that money and to come up with the right strategy. Are you investing? Are you saving? Like, where is that$5 ,000? Right now it's in a, I think it's a regular, it's not a Roth IRA. I think it's a regular IRA. Traditional. Yes. I think I'm pretty sure it's a traditional IRA. I don't have any money in stocks and bonds right now. Are you sure? Because if it's in that traditional IRA, did you allocate?

17:22I'm not sure. I think I did. I think I did. I haven't paid enough attention to it, if that makes sense. It's been a crazy eight months out here. So I need to go back and look at it. It probably is. I just haven't paid close enough attention. And I'm usually really good about that, but transitions are crazy. They are. They totally are. I mean, I worry about that because a lot of people say they invest in a raw IRA or traditional IRA, and then that means to them that they put the money in there, but that's only half of the process. You actually have to allocate where that money is going. It can't just sit there.

18:04So just can you make sure to check? I will worry about this. Yes, I will. Thank you. Okay. Well, the good news is you don't necessarily have to make$1.5 million of income in order to retire with$1.5 million. If you make smart investments, you're going to be earning interest. That's going to help you grow your retirement nest egg over time. And even if that time period isn't, you know, the longest, today is as good a day as any to get started. So investing is really an important part of this equation. And again, it's hard doing this as a freelancer because you're really navigating it on your own.

18:47You don't really have like an HR person, I'm assuming, to talk to. You are HR. Oh, yeah. Yeah. So for anyone mapping out their retirement, whether freelance or otherwise, I would recommend playing with a compound interest calculator. Have you ever done that? I know this is very nerdy and not what you want to do. We're talking right now on a Friday, like on a Friday night, but. No, I have played with compound interest before and it was fun. I just didn't completely under, like, I understand what compound interest is. I just am not familiar enough with how it all works to properly, completely understand it, if that makes sense.

19:30Okay. Oh, we have one on our website. There are also so many out there. You can just search for one. And it's, I mean, dare I say fun to put in different scenarios to see how you can tweak your budget and how that affects your retirement savings. So you can put in the calculator, how much you plan on contributing to your retirement accounts, and then you can put in an estimated interest rate. So for the estimated interest rate, maybe put in 7 % if you're planning on using a mix of funds that mimic the overall market and bonds. And then you can use the calculator to see if you'll reach$1.5 million through the contributions that you're making, or if you'll be short, and how you can sort of jigger it to get where you want to go.

20:16So, of course, the historical average of the stock market is not guaranteed. Over time, it will yield about 10%, not inflation-adjusted. Over time, inflation is about 3%, so inflation adjusted would be around 7%. But I think it's a helpful gauge of just how much you need to put away in order to meet those retirement goals. So does that make sense? Yes. Yes, absolutely. So you have a traditional IRA. There's also a Roth IRA. If anyone needs a refresher, basically taxes are the difference there. In a traditional IRA, you're paying pre-tax dollars. But when you take that money out, you have to pay taxes on it.

20:56You can't just get away from taxes in this scenario. You're going to have to eventually pay them. With a Roth IRA, you're paying taxes now, so you don't have to pay taxes later. Neither of them are tax-free. It just changes when you pay your taxes, whether it's on contribution or it's on withdrawal. Does that make sense? Yes. Yes. Do you have any questions there? No, that actually, that's the easiest way an IRA has ever been explained. Okay, good. Okay, good. So you have a traditional IRA, which means you're paying pre-tax dollars, but you're going to have to pay tax on it when you take that money out.

21:39But you don't have to limit yourself to one or the other. Did you know that? You could get more than one. You could get both. I have both. I did not realize that. Yeah, you don't have to be like team rough, team traditional. You can be team everybody. Like the more the merrier actually when it comes to these retirement accounts. So I personally have a 401k. I have a Roth IRA. I have a traditional IRA. I have a SEP IRA, which is like a special IRA that business owners can have that I set up a million and a half years ago and I haven't even paid attention to it. But that's where compound interest can do its thing.

22:19Even if you set it up and never contribute to it again, it keeps growing and doing its thing. Okay. Do you have a entity set up for yourself? Yes, I do. And then I also own a, well, it's an S core. So I have a business partner for a software company as well. So I freelance and own my own company. You do so many things, sister. Yeah, I do. That's crazy. But it could be another opportunity to get yet another retirement account. There are seps, there are simples. You know, simples are actually not that simple, but it doesn't matter. All I'm saying is that there's a lot. There are a lot of different retirement accounts at the retirement party.

23:10Okay. And you don't have to choose. You don't have to put a ring on any of them. Oh, yeah. I like not putting rings on things. Yeah, you can just, you can date around. You can have one of all of them. There is, though, an income limit on a Roth IRA. You can typically not contribute to a Roth IRA if you're making more than$150 ,000. As a single person, just FYI, I know you got divorced, but$236 ,000 for married couples filing jointly. Do you make more than$150 ,000 a year? Not right now. Once that software hits the market, I will make more than$150 ,000, I think. At least that's what the forecasting is showing.

23:52Yeah. Okay. So you can open a Roth IRA really easily. All of us can have a Roth IRA or a traditional IRA. But actually what's interesting and just this is a side note because you can open a Roth IRA through the front door, so to speak. There's also a backdoor Roth IRA, which is essentially where you roll one account into a Roth IRA. So you do in two steps what you can't do in one. It's weird. It's totally legal. It's a loophole. But we did a whole show about this. And I'll link that in the show notes if anybody is interested. But I digress. Back to you, Stephanie. Another important thing that you should know is that there are annual contribution limits.

24:37So in 2025, if you're under 50, which you are, the contribution limit is 7K. If you're older than 50, you can contribute a little bit more. It's always helpful to understand the philosophy about why these rules are in place. So you know that they're going to change the numbers. But the thought process behind that is the older you are, the more you can contribute. So those are the limits this year. They'll probably change next year. But another cool thing to know is that contributions that count toward your 2024 limit can be made until tax day of this year. So if you did not contribute for last year, for 2024, you can still contribute for last year.

25:20Oh, wow. Okay. I did not know that. Yep. You have until April. You know, tax day is always different, but you have until about April to make your contribution for the year prior. Amazing. Cool. So just to recap, I'd start by looking at how much you feel like you can start investing monthly. Put that into a compound interest calculator. See what it says you'll have saved after 14 years. If you're shy of that$1.5 million goal, don't panic. You have plenty of options. They will involve some compromises, unfortunately. You can always bump up the amount of money that you budget to invest monthly. You can do that either by trimming down some expenses or negotiating for more money in your 15 jobs that you have and companies and all the things that you're doing to try and increase the amount of disposable income you have and the amount of income that you can put toward retirement.

26:20Or you can push back your retirement to 60, 65. These are the levers that you have to play with. So you're going to have to play with one of them. You're going to have to move one of them around if you're not feeling like you can get to that$1.5 million goal easily. So just to recap, it's either the age that you're going to retire, the amount of money that you have to put in, or the budget that's going somewhere else. Okay. How does that feel? That actually feels doable. it doesn't seem as overwhelming when you break it down that way because as a freelancer it's like you have so many things up in the air and this actually makes like in my line producer's mind makes so much sense because i'm like oh okay well here like here are our steps here are our like as goofy as this sounds geometric proofs even though it's not a gym it's not Talk dirty to me, Stephanie.

27:18Yes. Like that's how I think though, is like, I think in proofs, like if this, then this, or if I, if I mix this variable, what does it do with my overall and not? Yeah. That's how my brain works. So thank you. However your brain works, there's a way to make it feel more doable. I love baby steps toward the finish line here. all finance stuff is overwhelming, even for people who got their MBA and work in budgeting and work in finance. It can be really overwhelming because it's not just numbers and zeros and ones, and it can be formulaic, but it's also all of the emotions that you have tied into whatever goal you're planning for.

28:03So, you know, you viscerally want to live in a garden. And so that could sway how you approach your retirement savings because also maybe you don't want to be like your stepdad. You know, like all this stuff comes into play because we're human. We're not machines. Exactly. So you mentioned that you had some savings for a down payment on your retirement dream home, right? And maybe this summer you'll have enough for a 300K down payment. Do you have your savings separate from your IRA account? Like where is that money? Yes, I have it in two separate savings accounts that are high yield savings accounts, probably not the best thing for me to do, but it felt the safest.

28:45So I just kind of forget that it's there. 99 % of the time I'm like, Oh, yeah, I forgot about that. Because it pulls like a little bit every month. I have one set up for me, one set up for my 16 year old son. And that's, that's how we do it. So, you know, his college fund is in a CD right now, but I'm going to move it when I can too, because I was not in a place to be able to like start saving for him as, as early as I should have. And so I'm taking a little bit more risk with his stuff that I actually feel comfortable with doing, but I want him to be able to go to the college he wants to too.