Realtor Retirement Plan: Self-Employed Agent Strategies
Retirement planning for real estate agents - managing commission income and building long-term wealth.
Key Takeaways
- 1Most realtors are self-employed and need to create their own retirement plans.
- 2SEP-IRA allows contributions up to 25% of net self-employment income.
- 3Solo 401k provides higher contribution limits and Roth option.
- 4Commission income volatility requires disciplined savings strategy.
- 5Real estate investments can complement traditional retirement accounts.
- 6Gold IRA provides diversification away from real estate market exposure.
Retirement Options for Self-Employed Realtors
As independent contractors, realtors must create their own retirement plans:
- No employer match means you must save more aggressively
- Self-employment tax reduces net income for contribution calculations
- Can combine multiple account types for maximum savings
| Account Type | Max Contribution (2024) | Best For |
|---|---|---|
| SEP-IRA | 25% of net income (up to $69,000) | Simple, flexible contributions |
| Solo 401k | $69,000 + $7,500 catch-up | Maximum contributions, loans |
| SIMPLE IRA | $16,000 + $3,500 catch-up | Small teams with employees |
| Traditional/Roth IRA | $7,000 + $1,000 catch-up | Additional savings |
SEP-IRA: The Realtor's Friend
SEP-IRAs are popular with realtors for good reason:
- **Easy setup:** Can open at any brokerage in minutes
- **Flexible contributions:** Contribute more in good years, less in slow years
- **High limits:** Up to 25% of net self-employment income
- **Deadline flexibility:** Can contribute until tax filing deadline
- **No annual filings:** Unlike 401k, no Form 5500 required
SEP-IRA Contribution Example
A realtor with $150,000 net self-employment income (after SE tax adjustment) can contribute up to $37,500 to a SEP-IRA. That's a significant tax deduction and retirement boost.
Solo 401k: Maximum Savings Power
Solo 401k offers higher limits than SEP-IRA for many realtors:
- **Employee + employer contributions:** Can contribute as both
- **Roth option:** Pay taxes now for tax-free retirement
- **Loan provision:** Borrow up to $50,000 for emergencies
- **Catch-up contributions:** Extra $7,500 if 50+
- **Better for lower income:** Beats SEP-IRA if income under ~$350k
| Income Level | SEP-IRA Max | Solo 401k Max | Winner |
|---|---|---|---|
| $100,000 net | $25,000 | $43,500* | Solo 401k |
| $200,000 net | $50,000 | $69,000 | Solo 401k |
| $350,000+ net | $69,000 | $69,000 | Tie |
*Includes $23,000 employee + $20,500 employer portion
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Managing Volatile Commission Income
Commission income fluctuates - your savings strategy should account for this:
- **Percentage-based saving:** Save 15-25% of every commission check
- **Separate accounts:** Keep retirement savings separate from operating funds
- **Quarterly estimated taxes:** Avoid penalties, save systematically
- **Emergency fund first:** 6-12 months expenses before aggressive retirement saving
- **Boom year strategy:** Max out retirement accounts in big years
Real Estate Concentration Risk
Many realtors have their income, investments, and retirement all tied to real estate. If the market crashes, everything crashes together. Diversify your retirement into non-real estate assets like stocks, bonds, and precious metals.
Diversify Beyond Real Estate
Your income already depends on real estate. Your retirement shouldn't be 100% exposed too.
- Gold provides diversification away from real estate market cycles
- Physical gold holds value when property markets decline
- Roll SEP-IRA or Solo 401k to Gold IRA tax-free
- Hedge against inflation that affects property values
- No correlation to housing market performance
Frequently Asked Questions
1What is the best retirement account for realtors?
For most realtors, a Solo 401k offers the highest contribution limits and most flexibility. It allows both employee and employer contributions, a Roth option, and loan provisions. SEP-IRA is simpler if you want minimal paperwork. If you have employees (assistants), consider a SIMPLE IRA or SEP-IRA.
2How much should a realtor save for retirement?
Aim to save 15-25% of your net income annually. Without employer matching, you need to save more than W-2 employees. In boom years, max out your retirement accounts. In slow years, contribute what you can. The key is consistency across market cycles.
3Can I use my real estate investments as retirement savings?
Real estate can be part of your retirement portfolio, but shouldn't be your only plan. Consider: your income already depends on real estate, creating concentration risk. Diversify with traditional retirement accounts invested in stocks, bonds, and alternatives like Gold IRA. You can also hold real estate in a Self-Directed IRA.
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