As a real estate agent, you’re in the business of helping people plan for their future — whether it’s helping prospective buyers find their forever home, starter house, or next investment property. But when it comes to planning for your future, it’s important to start early.

Saving for retirement is crucial so you can lead the life you envision after you’ve sold your last home. But it can be even more difficult for real estate agents since many are self-employed. Whether you have a retirement plan you contribute to or are just starting out on your retirement journey, here are a few ways you can begin growing your future nest egg.

1. Employer-sponsored 401(k) plan

If you’re employed by a real estate brokerage or company where you’re paid as an employee, you may have access to a 401(k). A 401(k) is a tax-advantaged retirement plan where you can contribute pre-tax dollars right from your paycheck. 

Many employers offer a contribution match up to a certain percentage. If your employer offers a match, it’s a good idea to try to contribute as much as they’ll match to take full advantage of this benefit. In 2024, employees can contribute up to $23,000 to their 401(k) — up $500 from 2023. If you’re 50 or older, you can contribute up to $30,500 in this account due to $7,500 catch-up contributions. 

2. Solo 401(k) 

If you’re self-employed, like most realtors, and have no employees on your payroll, you may be eligible to open a solo 401(k). Designed for self-employed individuals, a solo 401(k) offers many of the same perks as a workplace 401(k) — with a few caveats.

As a freelancer, you’re able to contribute as both the employee and employer, giving you more flexibility to add more to your account each year. However, since you’re both parties, the money is also coming straight from your pocket. In 2024, you can contribute up to $69,000 into a solo 401(k), and $76,500 if you’re 50 or older. The amount you can contribute as the employer will vary based on your income.

3. SEP IRA

Another popular option for realtors who are self-employed is the Simplified Employee Pension Individual Retirement Arrangement, also known as a SEP IRA. This tax-deferred retirement plan allows you to contribute to it as an employer. If you have employees, you’ll contribute the same percentage you contribute to your own fund. You can invest up to 25% of your pre-tax income into this plan, which could be a considerable amount depending on how much you make each year.

Which is better: A Solo 401(k) or a SEP IRA?

Since most realtors won’t qualify for a traditional 401(k), you’ll likely be choosing between a Solo 401(k) or a SEP IRA. There’s no simple answer as to which is better: Both have their own benefits and drawbacks. 

Here are some differences to consider to help you find the right retirement plan for your future:

Do you want to pay taxes now or later? 

If you contribute pre-tax dollars to a retirement plan, you’ll owe taxes down the road when you withdraw your funds. If you contribute post-tax dollars, you’ll be able to withdraw that money in full because you’ve already paid taxes on it. You often make out better contributing pre-tax if you’re a high-income earner, but if you want the flexibility to decide, a Solo 401(k) lets you choose between pre- or post-tax contributions. 

An SEP IRA, on the other hand, requires you to contribute pre-tax, so you’ll owe taxes when you pull from your funds in the future.

Do you want to draw on the funds before you retire?

Although experts don’t recommend taking out a loan against your retirement fund if you can avoid it, sometimes a painful expense pops up and it’s the best course of action. If you’d like the ability to borrow against your retirement account, you should choose a Solo 401(k).

A Solo 401(k) lets you borrow up to $50,000 or 50% of your retirement fund (whichever is less), tax-free and without penalties. A SEP IRA does not offer this feature.

Which account will let you contribute the most money each year?

In most cases, the Solo 401(k) will allow you to contribute the most overall each year, regardless of your age. But as you approach retirement age, if you’re behind on your retirement savings or simply looking to maximize your contributions, a Solo 401(k) offers the opportunity to contribute more through its “catch-up” limit. While contributors under 50 can only contribute $69,000 in 2024, those 50 and older can contribute a little more ($76,500) thanks to this catch-up contribution option.

That said, if you make more than four times this amount in real estate commissions and other business profits, you might be better off with a SEP IRA since you can contribute up to 25% of your income each year. 

Other retirement investment options to consider

In addition to a main retirement plan, you can also grow your money in other ways. You can contribute to investment plans like index funds, ETFs, bonds, and more to help grow your money for retirement. Just be aware that stock market investments can be risky and returns aren’t guaranteed. It’s a good idea to talk to a financial planner before opening a new investment account.

You can also grow your portfolio through real estate investments, whether you’re buying and renting homes or multi-unit buildings, buying and flipping properties, or investing passively in REITs and other real estate funds.

As you near retirement age, it can also be helpful to move some of your savings into certificates of deposit that offer fixed returns in exchange for locking up your money for a set period of time. You should be sure to keep an emergency fund — or an amount you feel comfortable having on hand — in a high-yield savings account as well. 

A CD offers a set return as long as you don’t withdraw your money early, while a high-yield savings account offers a variable rate, but the flexibility to withdraw funds when you need it. Currently, interest rates are at a 15-year high, so it’s a good time to take advantage of high yields. 

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