myth #7 You will not be able to save for retirement with self employment

Often people fear that they will not be able to save for retirement from self employment without a company pension plan. Financial planning is the key to saving for retirement as an employee or a self-employed individual. Unfortunately many companies are no longer offering pension plans for their employees and therefore the burden of retirement savings on the employed individual is much higher now. Ironically, this shift has meant that self-employed individuals may have an advantage over employees. Most self-employed individuals make their cash up front and pay less in income tax installments and with-holding taxes. This provides them with the cash flow to invest more money in 401ks and RRSPs during the year than employees. Additionally, self-employed individuals often have the option of “soft retirement” by shifting to part-time work before retiring completely.



MY TAKE: Personally, my switch to self-employment has sparked me to be more cognizant of saving for my retirement. In fact, my pension savings more than doubled in my first year as a contractor and have continued to grow steadily since then.

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