Retirement savings guidance for independent contractors

(CNN) — Independent contractors who work for several clients over the course of a year need to be deliberate about building retirement savings in whatever way they can.

Certified financial planner Douglas Boneparth responded to a reader who has a seasonal opportunity to save through a workplace plan.

A reader wrote: I work as a contractual employee for the state of Maryland during their 90-day legislative session and have never taken advantage of their offer to open a 401(k). Should I take advantage of this or is it more complicated than the payoff? They usually erase all my info at the end of session wherein I need to re-establish myself anew every year. Would the 401(k) stay in place, and would I be able to continue to contribute even though the job ended?

DOUG: This is a smart question, and I don’t want you to miss out on money you could be putting away.

The key point is that the 401(k) remains yours. When the session ends and your employment technically stops, the account does not vanish with your personnel record. The money you put in, along with any investment growth, belongs to you. What you cannot do is keep making contributions until you are enrolled again and back on the payroll in a future session.

So is it worth the trouble of setting up contributions each year? In most cases, yes. Even relatively small deposits made during a brief legislative session can still grow tax-deferred. If an employer match is available, that is essentially extra compensation and a return that is difficult to duplicate elsewhere. The paperwork can be inconvenient, but it is not a good reason to skip the plan.

My advice is to make re-enrollment part of your routine each time you return. Put it on your calendar as soon as you know your start date. Contribute as much as you reasonably can while you are eligible. When the session ends, you can leave the money in the plan or roll it into an IRA, which can simplify things and give you more control over your investments.

The bottom line is that the benefit is likely worth it. Do not let administrative hassle keep you from leaving tax-advantaged savings on the table.

Tip of the week: Take advantage of free money

Starting in 2027, many workers may qualify for a federal Saver’s Match.

Eligibility includes people with a modified adjusted gross income below $35,500, or $71,000 for married couples, who are also able to contribute to a qualified retirement plan such as a 401(k), 403(b), 457(b), deductible IRA or state-based auto IRA.

The Saver’s Match could be worth up to $1,000, or $2,000 for married couples. It is claimed on a federal income tax return for 2027, which can be filed in early 2028.

In addition, if a Trump Account is opened for a child, families may receive $1,000 from the federal government for children born between January 1, 2025, and December 31, 2028. That amount may be doubled if an employer has agreed to match the federal seed money. For children under 18, the account may also be eligible for contributions from philanthropies or state governments that have pledged funds for Trump Accounts.