When you tell someone you're self-employed, the first thing they tell you is that you're lucky because you don't have a boss hovering over you. However, while being employed means having freedom, it also means taking on a great deal of financial responsibility and being aware that: you don't get paid vacation time, you don't get extra pay, if you get sick you have to continue paying the self-employed fee for a while... In Spain, Self-employed workers receive lower pensions than employees, so self-employed workers need to plan ahead for retirement.
How about we give you a hand and tell you how you can get organized and establish strategies to prepare for your retirement as a self-employed person? Let's get to it.
The first step: know your current situation and your goals
According to data in Spain, the average pension for a self-employed person is less than €1.000 per month, which means they would receive less than even the minimum wage. In fact, the pension for salaried employees is considerably higher, exceeding €1.500. And, in reality, many self-employed workers only receive €700 because they pay contributions based on the minimum wage throughout their working life.
For this reason, you need to plan your retirement as a self-employed person and the first thing will be calculate what your current expenses are and what you will have in the future. It's also a good idea to set a goal. That is, once you know what expenses you're (supposedly) going to have, you need to determine how much money you want to have each month to live on during your retirement.
To make it clearer, imagine you're currently living on €2.000 a month. However, for retirement, you want €3.000 a month. The problem is that your pension will only guarantee you €1.000. So, you need to plan strategies to get those €2.000 you're missing.
Make the most of your quotes
As you know, from 2023, The RETA contribution system adapts to real income and therefore there are flexible brackets.These can be modified up to six times a year, which is highly recommended to avoid overpaying later. Furthermore, being able to contribute based on higher contributions will help you improve your retirement pension.
Thus, the recommendation is that always try to quote on the highest possible base, to increase your pension, even slightly. Ideally, this would be achieved throughout your working life, but in a self-employed business, this is quite difficult to achieve.
Start saving as soon as possible
Having a savings strategy can be good for you. But be careful. It's not just about setting aside a portion of your earnings to save for the future. That will only mean that, due to inflation, things that were once worth a lot won't be worth much anymore. You have to find some. options that allow your money to continue moving so that it gives you profitabilityOtherwise, when retirement comes, you won't be able to implement your strategy.
In this sense, you can try pension plans or investing in funds. Or, opt for other more volatile options (as long as you're knowledgeable and don't invest all your savings).
Although you might initially think that saving means setting aside a large percentage of your income, this doesn't have to be the case. In fact, it depends on when you start saving, because there are many strategies that, if followed, will allow you to earn profits that, accumulated over the years, will allow you to reach a significant amount with which to live according to the goal you've set.
Set aside an emergency fund
Since self-employed income is unstable, with some people having more work than others, it's best to have an emergency fund of three to six months' worth of expenses. This will give you time to find ways to recover your income if work ever becomes scarce.
Furthermore, experts recommend avoiding debt in your later years of work. If possible, you should have a maximum of 60% debt before age 25.
Note that This emergency fund is not the same as the savings fund. They are completely different, and you should only use this one when you really have an emergency or don't have enough income.
Retirement modalities
In Spain, currently the Retirement age in 2025 is 66 years and 8 months (to reach 2027 years of age in 67). However, this isn't the only option. You also have early retirement, which can start as early as 64 years and 8 months. The problem is that if you retire before your due date, Social Security will deduct a portion of your pension, which can be as much as 21%. In the case of retirement for the self-employed, this represents a significant cut in what they receive each month. And that's why many endure, and even continue working beyond the official retirement age.
Each case is different and the Whether you retire at one age or another will depend on your personal situation, as well as whether you want to continue working or not. For example, if you have a recognized disability, you could retire early without losing any of your pension.
The key to retirement for the self-employed
Considering that the public Social Security pension system is currently unstable, and that it is unknown what will happen in the future, many people begin planning for their own retirement at a young age. Since they don't know whether they will receive a pension when their time comes, what they do is establish a priority on private savings So that when they can no longer continue their working life, or decide to stop working, they can count on monthly income that allows them to live the lifestyle they have chosen for those years.
Are you self-employed and already thinking about retirement? Are you doing anything to guarantee a minimum income for that time? We'll read your comments.