How To Plan Your Retirement As An Owner-Operator - Advanced-Trucking
creating a retirement plan

How To Plan Your Retirement As An Owner-Operator

If you evaluate yourself right now, do you think your current spending and saving habits are enough to prepare you for retirement?

Once your business gains traction as a fleet owner-operator, incorporating a weekly or monthly retirement savings commitment into your budget is important. Saving for retirement is crucial, especially for those who work for themselves and are not qualified for an employer-sponsored retirement plan.

Getting Ready For Retirement

Based on a study by the U.S. Department of Labor, an average American’s pre-retirement income will only be partially replaced by Social Security. Meanwhile, according to experts, you’ll need to maintain your lifestyle after retirement with roughly 70% of your pre-retirement income.

A truck driver making $60,000 a year at 70% will require roughly $42,000 after retirement. That amount compounded by the average post-retirement lifespan of 20 years will provide the driver with a monthly living expense of around $840,000. It’s not necessary to set aside that whole sum in advance. A part of it would come from earnings from investments, retirement programs, or Social Security. While there’s never a “required” time to start saving for retirement, the earlier you do it, the better.

A 25-year-old will have about $2.5 million when he retires if he deposits $400 into a retirement fund each month until he is 65 and his funds increase by 10% annually. A 35-year-old will have slightly more than $900,000 at age 65 if he invests the same amount every month and makes 10%. 

Social Security

You can start collecting Social Security payments later, at full retirement age (66–67 years old, depending on your birth year), or early (at age 62).

If you plan to start receiving them before retirement age, it’s crucial to know when you can reduce your Social Security benefits.

Before their Social Security benefits are reduced in 2023, taxpayers receiving benefits but have not yet reached full retirement age are allowed to make up to $21,240 a year.

If you make more money than this, your SSB will be lowered by $1 for each $2 over the cap.

On the other hand, your Social Security payments remain unchanged if you continue to earn as much as you like after you reach your Full Retirement Age (FRA). 

This implies that you can continue to work and make money as an owner-operator truck driver on top of receiving Social Security payments.

Plans For Qualified Retirement

You will be responsible for paying taxes on gains from investments not part of a retirement plan, such as stock sales profits or savings account interest. You don’t have to pay any taxes on the earnings in qualified retirement accounts until you start withdrawing and reaching retirement age. In addition to being postponed for many years, taxes should have decreased by that point, saving you money.

Furthermore, you can deduct contributions from your reported income in the majority of retirement plans. This implies that you report only $38,000 on your income tax return if you make $40,000 and contribute $2,000 to a qualifying plan.

Below are the most well-known qualifying plans for owner-operators:

Traditional IRA

An IRA allows you to make tax-deferred contributions of $6,500 annually, with a $1,000 catch-up contribution cap for anyone 50 years of age and above. Contributions to an individual retirement account (IRA) are tax-deferred and lower your taxable income if not enrolled in an employer-sponsored plan. Merely a portion of your IRA contribution is deductible if you or your spouse contribute to an employer-sponsored plan, like a 401(k). With rare exceptions, you are not allowed to withdraw your IRA money before the age of 59.5 without paying a substantial penalty.

Roth IRA

The terms of contributions and payouts are where a standard IRA and a Roth IRA diverge. Contributions to a Roth IRA are taxed in the year they are made since they are not subtracted from income. However, they do grow tax-deferred, and upon withdrawal, they are free from taxes.

Simple IRA

Companies with fewer than 100 employees were the target market for the SIMPLE (Savings Incentive Match Plan for Employees) IRA. Both you and your workers are eligible if you employ others. An employee of your company may contribute to a SIMPLE IRA up to $15,500 in 2023, with a $3,500 catch-up contribution cap for individuals 50 and over. You may also match contributions made by your employee up to $15,500.


A Simplified Employee Pension plan allows an employer to contribute up to 25% of net income (up to $66,000 total) to an IRA set up for himself or his or her employees. After money is put into the plan, it must stay there until the owner turns 59.5. Early withdrawals are subject to federal income taxes and a possible 10% penalty. 

Individual 401K

A different type of tax-deferred savings option called 401(k) retirement plan was previously only available to employees, frequently with an employer match to encourage savings. However, since 2001, anyone has been able to open a solo 401(k) with an annual contribution cap of $22,500, provided that they are paying themselves a salary and are considered employees of their own company, such as in a S Corp structure. There are additional complicated rules if you work for yourself. 

ira 401k on blocks

Roth 401K

The Roth 401(k) is a more recent retirement plan option that combines the benefits of both the single 401(k) and the Roth IRA. Contributions are taxed once in the year they are made, and then never again. The ideal choice for an owner-operator, according to many financial advisors, is a Roth 401(k).

The safest bet is to assume that taxes will rise eventually, so paying now locks in the lower rate. It is ideal to pay as much taxes as possible when you are younger.

Retirement Countdown

Having a nice retirement doesn’t mean being born wealthy or making tons of money during your working years. It might mean taking appropriate actions as early as possible, so you can begin your “retirement countdown” far in advance of receiving your last settlement check.

How might a countdown like this look? Here are some suggestions:

10 Years Before Retirement

You may be at, or very close to, your earning potential at this point in your career. Simultaneously, your children might have grown up and moved out, and you might have even settled your mortgage. When all of these things are considered, you may have the financial means to “max out” on your IRA or other retirement accounts. And if you can, that’s precisely what you should do because these retirement accounts allow you to diversify your investments and take advantage of tax benefits. 

5 Years Before Retirement

Check your Social Security statement at different ages to see how much you should anticipate getting each month. Benefits can normally be started at age 62, but if you wait until your “full” retirement age, which is probably going to be 66 (plus a few months) or 67, your monthly checks will be much larger. If you can afford to wait until you are 70 years old, when your benefits reach their maximum, your payments will be much more. In any case, before choosing when to begin drawing Social Security, you’ll need to consider several things, including your health, your family’s longevity history, and your other sources of retirement income.  

1-3 Years Before Retirement

You may want to convert some, but probably not all, of your growth-oriented investments—stocks and stock-based vehicles, for example—into income-producing investments, like bonds, to help boost your retirement income stream. But bear in mind that, to stay ahead of inflation, you’ll probably still need your portfolio to have some growth potential during your retirement years.  

1 Year Before Retirement

Analyze your retirement spending and income and evaluate your potential medical expenses. You might be qualified for Medicare depending on your retirement age, but you’ll probably also need to pay for some supplemental coverage, so you’ll need to budget for that.

As your actual retirement date approaches, you will also need to figure out the right rate of withdrawal for your investments. 

What is the appropriate annual withdrawal amount from your 401(k), IRA, and other retirement accounts? The size of these accounts, your retirement lifestyle, your anticipated longevity, whether you have begun receiving Social Security, whether your spouse is still employed, and other variables all play a role in the response. You can get assistance from a financial expert in figuring out the right withdrawal rate.

How To Pay For Your Retirement

Paying for retirement is all your duty as a fleet owner-operator, therefore it’s critical to give it a top priority. It’s better to start early rather than later since you’ll have a better chance of success because everyday matters.

How to begin saving money for retirement:

Make A Financial Plan

You can monitor how much money you make and where it’s going with a budget. One of two issues can frequently be the cause of insufficient funds: either you are not earning enough money or you are spending excessive amounts of what you do earn. For the majority of us, it’s usually the second issue that needs to be resolved.

Cut Back Unnecessary Spending

Determine what you “need” against what you “want,” then make the appropriate financial adjustments. Put any money left over for things you don’t “need” into an emergency fund or retirement account. There are numerous strategies for reducing wasteful spending. Planning for retirement wasn’t simple, but making the necessary sacrifices now will pay off in a more comfortable retirement.

Build An Emergency Fund

You can start your emergency fund after you have some extra cash by spending less. If something keeps you from working and producing money, this should be sufficient to pay all your bills and costs for six months. If you put this money aside for emergencies, you won’t have to take money out of your retirement account.

Factors To Consider

What information would you require while designing your retirement’s financial and investing strategies? To put it another way, what aspects should you take into account, and how will they influence the decisions you make about investments both before and after you retire?

Think about the following:

Retirement Age

It should come as no surprise that your financial status will have a significant impact on when you can retire. However, if you have an option, your choice may significantly affect your approach to investing. For instance, you might need to save and invest more aggressively if you intend to work much past the average retirement age than if you wish to retire early.

Retirement Lifestyle

While some travel during their retirement years, others are content to stay near their homes and families and engage in low-key pastimes. Your lifestyle choice will have an impact on the amount you need to save for retirement and the amount you will need to take out of your various investment accounts when the time comes.

Second Career

After retiring from one career, some people start a new one. Should you feel that you would like to take on a “second act” in your professional life, you may find that you require further training or choose to work as a consultant using your current experience. Starting a new career could have an impact on your financial situation. One possibility is that you may be able to take out less money annually from your retirement accounts if you add another source of earned income.

However, if you continue to earn income, you can continue to contribute to a Roth IRA or a traditional IRA until you are 70 ½ as well as to a self-employed retirement plan like a SEP-IRA or an “owner-only” 401(k). Just be aware that once you reach 70 ½, you will be required to take at least some withdrawals from your 401(k) or other employer-sponsored retirement plan.


You may have regularly given money to charitable organizations during your working years. And you might want to do even more after you retire. Of course, one option is to give more of your time as a volunteer. However, you may also choose to establish some longer-term financial support mechanisms. To increase your support for charity organizations, you may wish to collaborate with your financial advisor and legal counsel to include certain components of your investment portfolio in your estate plans.

You can see that your investment approach can influence your retirement goals and vice versa. Thus, carefully consider your goals, make a plan, and obtain the assistance you require. A successful retirement requires work and patience, but the rewards are well worth the effort.

Overcoming “Barriers” to a Satisfying Retirement

It’s critical to think about any “roadblocks” in your path to the retirement you’ve always dreamed of.

These are the top five most typical roadblocks:

Lack Of Money Invested

Not many of us have ever admitted to making “too much” retirement investment decisions. However, a lot of people feel guilty about not saving and investing enough. Avoid making that error. Make the maximum contribution you can, and when your income rises, so do your donations. Never stop searching for additional ways to reduce spending, and put this “found” money into your retirement.

Underestimating How Long You’ll Live

Although you can’t tell how long you’ll live, you can estimate your chances quite well, and you might be shocked by what they are. The Social Security Administration states that, on average, men who turn 65 today will live to be 84.3 years old, while women may expect to live an average of 86.6 years old. That’s a long time, so you’ll need to account for it when you make long-term investments, spending, and saving plans.

Failing To Set A Reasonable Withdrawal Rate

You will probably have to begin taking withdrawals from your 401(k), IRA, and other retirement assets as soon as you retire. You must make sure that your annual withdrawals are reasonable because, of course, you don’t want to run the risk of running out of money. For this reason, you should choose an annual withdrawal rate that makes sense for your circumstances, taking into account things like your age, the size of your retirement accounts, how much you expect to spend on living expenses, and so forth. It can be difficult to calculate this kind of withdrawal rate, so you might want to speak with a qualified financial advisor.

Taking Social Security At The Wrong Time

Although delaying the start of your Social Security benefits may not be financially feasible for you, you could greatly benefit yourself by doing so.

Ignoring Inflation

Even in your retirement years, you want to have certain investments in your portfolio that have the potential to beat inflation.

You can make your route to retirement easier by being aware of these obstacles and taking action to get beyond them. Once you retire, you might even find that you like it more.

Additional Tips

  • Though you should start saving as soon as you can, time is of the essence when it comes to retirement planning.
  • If necessary, start small because, over time, even modest investments can yield large returns.
  • If you want to consistently save money, use payroll deductions that are taken out automatically.
  • Keep your retirement account(s) empty.
  • The majority of your retirement savings should be in Individual Retirement Accounts (IRAs) and 401K plans.
  • Your investment strategy should be more aggressive the younger you are.
  • As you age, make regular adjustments to your portfolio to shift your allocation from risk to security.

Retirement accumulates value and quantity over time, much like any other valuable collection. If you leave it another 20 or 30 years to consider your retirement, you will never be able to accumulate the savings required. But if you act soon, you may capitalize on the time and utilize all of your hard-earned cash. Your savings will increase gradually, and eventually, you’ll take advantage of tax breaks and compound interest. At that point, you may begin planning what you’ll do with all your extra money when you retire!

It’s time to start investing if you hope to have a nice retirement someday. We advise having a conversation as soon as possible with an investing advisor if you’re still unsure where to place your money.