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

Episode Date: April 14, 2025

Today’s caller is living the freelance dream—flexible schedule, creative freedom, but… zero employer retirement benefits. If you’re self-employed and wondering how the heck you’re supposed to save for retirement without a 401(k), this episode is for you. Nicole breaks down the best retirement accounts for freelancers, how to reverse-engineer your savings plan, and how to turn “irregular income” into “regular savings.” Because yes, you can have a dreamy retirement, even without a W-2. To open your Traditional or Roth IRA today, go to public.com/moneyrehab Paid endorsement for Open to the Public Investing, Inc., member FINRA & SIPC. This information is for educational purposes only and is not tax or investment advice. Consult your tax advisor for individual considerations. Visit the IRS website for more information on the limitations and tax benefits of Traditional and Roth IRAs. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, member FINRA & SIPC. *Terms and Conditions apply.  All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Brokerage services for alternative assets are offered by Dalmore Group, LLC, member FINRA & SIPC. Brokerage services for treasury accounts offering 6-month T-Bills are offered by Jiko Securities, Inc., member FINRA & SIPC. Banking services are offered by Jiko Bank, a division of Mid-Central National Bank. Securities investments: Not FDIC Insured; No Bank Guarantee; May Lose Value. See public.com/#disclosures-main for more information. *APY as of 6/20/24, subject to change.

I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. When 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. Stephanie, 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. And 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 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. So 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 $100,000 for your brain. 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 a problem for today. Our goal is to help you to create your financial strategy. And I'm assuming 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. Okay. So we are 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? Give me some words when you start thinking about money. Um, as far as current situations, stressed, anxious, spiraling out of control.

Um, 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, um, 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. So 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 a good and she has all of like she has a CPA, she has all of these other things. In fact, she was a fraud auditor, which I think is amazing and cool. It's very badass. Yeah, 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 whole 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 him 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. And 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.

Same. Do you have a sense of how old do you want to be when you retire? Yeah, if possible, I would love to be 55 or 60, though 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 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. When 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 nature II 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 right now? No, actually, I live in the mountains right now in Burbank. Okay. So for retirement, you would be up sizing, 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 the grocery store and whatever? What are your utilities like? What 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? 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 a lot of vegetables, things like that, hence gardening, like being around gardens, being able to do things like that. 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 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 it's not the really really high-end stuff, but it's not also your budget stuff either. Does that make sense? Mm hmm. 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 about4,500 a month right now. Okay. And I'm fixing that, um, because I'm moving to a different space that is less expensive, but larger in a different part of Los Angeles.

So it makes, it makes a whole lot of sense to me. It'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 thousand dollars. Cool. So it sounds like your dream life and retirement

is pretty similar to what you are living on right now. OK, so let's use that number, your annual burn rate, so your monthly times 12. Just use what we have right now. Even though it might go down, it's always better to overestimate than underestimate. So 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 say 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. So from 55 to 85. How does that sound?

I know it's a big number. I was 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. doesn't actually sound like, I mean, that's a decent sized film. So like to me, 1.5 is a decent production. 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 per Stephanie and 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. So I picked up everything from central Texas and moved to Los Angeles. So yes, I have a lot of work to do. It was a transition time. Yes, yes.

We're gonna need more money, clearly. The first thing to do is to think of how we're gonna 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. Um, traditional. Yes. I think I'm, 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? I'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 rather rare 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. So 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. You don't really have like an HR person I'm assuming to talk to you. You are HR. Oh, I'm 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 night. But no, I have played with compound interest before and it was fun. I just didn't completely understand.

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. Okay. 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 wanna go. So 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. You 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 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. 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. But you don't have to limit yourself to one or the other.

Did you know that you could get more than that? You could get more than one. You could get both. I have both. Oh, I did not realize that. Yeah, you don't have to be like team Roth, 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 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. Even 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, symbols 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. 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 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 150k a year? Not right now. Once that software hits the market, I will make more than $150K, I think. At least that's what the forecasting is showing. Yeah. 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. So 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, you know, 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. Oh, 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,

or you can push back your retirement to 60, 65. These are the levers that you have to play with. So you're gonna have to play with one of them. You're gonna 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 gonna 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 producers mind makes so much sense because I'm like, oh, okay, well here, like here are steps here are like, as goofy as this sounds geometric

proofs, even though it's not a gym. It's not Stephanie. Yes. Like, that's how I think though is like, I think in proofs, like if this, then this, or 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. So, 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. 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? 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. So 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 out when I can too, because I was not in a place to be able to like start saving for him 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. Cause you know, he of course wants to go to a very big expensive college, which is good. I'm glad, but also scary. It's amazing. And you're an amazing mama. And as a new mama myself, I know the impetus to want to do everything for your kid. All I'll say for that is that

you have to put your oxygen mask on first. Yes. Even before helping him because there will be scholarships for college, there's financial aid. Unfortunately there's no scholarship or financial aid for your retirement. And this is something that a lot of parents struggle with because they want their kid to go to an amazing school and have an amazing life and in some cases, you know, have a better life or opportunities than you had. And that's so normal as a parent. But you know, if you're choosing between his college fund and your retirement account, I want you to choose your retirement account, I want you to choose your retirement account.

That actually makes a lot of sense. It's interesting to think that like it's it's not selfish. Like it feels selfish, but it's not. It's like you said, put your oxygen mask on first. Yeah, you know, it's I think selfish gets a bad rap, especially for women, but being selfless, I think is even worse. You know, you, you definitely, I think you're definitely doing something for your son if you take care of yourself financially so that they don't feel burdened to take care of you, which I'm sure he will want to because you took care of him. Like I'm sure my daughter, she better want to take care of you, which I'm sure he will want to because you took care of him. Like, I'm sure my daughter, she better want to take care of me. I'm taking care of her. But like, we just have to sort of fast forward the videotape and what that looks like. And if you put all of the money that you have toward savings, if you put all of your the money that you have to save toward his college account and nothing toward yours, it's not helping him and it's not helping you.

So a little bit of tough love, but you can take it. Absolutely. We have a plan. I love it. Thank you so much for taking the time. Thank you. I am so, so proud of you. You're doing awesome.

And I don't want to hear you say like, oh, I should have invested more. I should have helped him more. You are doing it. You did what you could and now you're going to turbocharge it. Let's go. Yes. Thank you so much. For today's tip, you can dig straight to the bank.

I mentioned at the beginning of this episode that I tell you where I'd open an IRA, whether it's a traditional IRA or Roth or both. And my answer is my favorite, public. You know public as the only place I personally buy bonds, but now they also support IRAs too. So if you roll over a 401k or if you transfer an IRA to public, you could earn a bonus of up to $10,000. So open your account today at public.com slash money rehab. Your future self will definitely thank you. This is a paid endorsement by public investing. Full disclosures and conditions can be found in the podcast description.

Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions, moneyrehabatmoneynewsnetwork.com to potentially have your questions answered on the show

or even have a one-on-one intervention with me and follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.