Expert gives advice to independent contractors on how to save for retirement

By Jeanne Sahadi, CNN

(CNN) — If you’re an independent contractor working for a few clients throughout the year, you have to be very intentional about building your retirement savings however you can.

Certified financial planner Douglas Boneparth advises one independent worker about a temporary but annually recurring savings opportunity.

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: Great question, and I want to make sure you don’t leave money on the table here, because I think you might be.

Let’s start with the most important thing: Yes, the 401(k) stays. It’s yours. When your session ends and your employment technically stops, the account doesn’t disappear with your HR file. The money you contributed (and any growth on it) belongs to you. You just can’t make new contributions until you’re re-enrolled and employed again during the following session.

Now, is it worth the hassle of re-establishing your contributions every year?

In most cases, yes, and here’s why. Even modest contributions made over a short legislative session benefit from tax-deferred growth. And if there’s any employer match involved, that’s an instant return on your money that’s very hard to replicate anywhere else. The administrative friction exists, but it’s a solvable problem, not a reason to opt out.

Here’s what I’d suggest. When you re-enroll each session, treat it like a recurring appointment you can’t miss. Put it on the calendar the moment you know your start date. Contribute as much as you reasonably can during the session. When the session ends, you have options. Primarily that’s to leave the money in the plan, or roll it over to an IRA, which consolidates everything in one place under your full control and gives you more investment flexibility.

The short answer here is the payoff is almost certainly worth it. Please don’t let the paperwork be the reason you leave tax-advantaged dollars behind.

Tip of the week: Take advantage of free money

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

Who’s eligible? Anyone with a modified adjusted gross income below $35,500 ($71,000 if married) who is also eligible to contribute to a qualified retirement plan (eg, a 401(k), 403(b), 457(b), deductible IRA or state-based auto IRA).

The Saver’s Match is worth up to $1,000 ($2,000 if married). It’s money you claim on your 2027 federal income tax return, which you can file in early 2028.

And starting this year, if a Trump Account is opened for your child, you may get $1,000 from the federal government if your child was born between January 1, 2025, and December 31, 2028. That amount may be doubled if you work for an employer who has pledged to match the federal seed money. And for any of your children under age 18, the account may be eligible for a contribution from philanthropies or state governments that have pledged money for Trump Accounts.

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