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Ask an Advisor: I’m a Commissioned Employee But My Job Doesn’t Offer a Retirement Plan. What Are My Options?


I am a hairstylist working as a commissioned employee, not an independent contractor. My employer offers no benefits, so I have been doing it on my own with a Roth IRA and taxable brokerage account. Are there any other tax-advantaged options for my situation?


Yes, as an employee your options are more limited. If you were an independent contractor you’d have many of the same plans available to you as a self-employed person.

I suggest you start by having a candid talk with your employer about your situation. They may be able to offer a basic plan, or there’s also the possibility of changing your classification from employee to independent contractor. Barring that, a health savings account (HSA) may be an option. (And if you need help with retirement planning, consider speaking with a financial advisor.)

Talk With Your Employer About Starting a Plan

I’m making an assumption that you work for a small business since there isn’t a corporate retirement plan that’s offered to you. That may mean it’s easier to have a conversation with the owner. If so, start by expressing your concerns about your ability to save for retirement, but come prepared to help them understand the various options. 

It’s possible that they don’t currently offer a retirement plan simply because they don’t understand how. Cost is likely a major concern as well. Do some research on small business retirement plans and help them see how they could implement one and what the cost might be based on the number of employees and an estimate of their total payroll. Simplified Employee Pension (SEP) and SIMPLE IRAs are a good place to start. (And if you have other retirement-related questions, this tool can help match you with potential financial advisors.)

Your Worker Classification

A young woman in her office.

This may or may not be a viable route, but you can also take another look at your worker classification. You may be able to make a case for changing your classification from employee to independent contractor. Doing that would open a lot of opportunities for you to start your own self-employed retirement plan.

Be aware that it’s not simply a matter of saying “Ok, now we will say I’m an independent contractor.” You must actually be an independent contractor. Assuming you are properly classified as an employee now that means you would need to make material changes to become an independent contractor. 

Those changes may or may not work for you and your employer, but it’s worth exploring. Be mindful that there are other tax implications too, so look at the whole picture. (And if you need help with other areas of your finances, consider working with a financial advisor.)

Health Savings Accounts

If you don’t already have a health savings account (HSA), that may be a good option here as well. In general, I think HSAs are severely underutilized and can be a great way for someone in your position to save more for retirement.

Obviously, HSAs are not intended as retirement savings vehicles but for health care expenses. However, that doesn’t mean they aren’t great for that purpose. Here’s how it could work for you:

  • Make sure you qualify. You must be enrolled in a high-deductible insurance plan in order to qualify for an HSA.
  • Open an HSA and make tax-deductible contributions. The 2023 limit is $3,850 for an individual or $7,750 if you have a family. These contributions will lower your taxable income for the year.
  • Invest your contributions like you would your IRA. Keep in mind that your investments grow tax-free.
  • Let your balance grow. Rather than using your balance to pay for current healthcare expenses, simply continue to pay for them out of pocket and let your balance grow. There is no “use-it-or-lose-it” component to HSAs, so the money is yours for life.

HSA distributions have a unique tax treatment. As long as you use withdrawals to pay for qualified medical expenses, the money isn’t taxed. The cool thing here is that you can “save” your qualified expenses to withdraw later. So, as you get older and require more medical care, you won’t have to rely entirely on your regular retirement savings. You can use your HSA balance to cover those costs.

Keep in mind that withdrawals for non-qualified expenses are taxed and are subject to an additional 20% penalty. However, that 20% penalty goes away once you turn 65, and your HSA distributions are simply taxable like an IRA. (And if you need help managing your HSA or your overall financial plan, consider working with a financial advisor.)

Bottom Line

A young man reads a document about his tax-advantaged plan.

Start by having a talk with your employer about offering a plan. You may even be able to get an employer match out of the deal. If that doesn’t work and changing your worker classification isn’t a viable option then consider an HSA in addition to your taxable brokerage account and IRA.

Tips on Finding a Financial Advisor

  • If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you.  If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Consider a few advisors before settling on one. It’s important to make sure you find someone you trust to manage your money. As you consider your options, these are the questions you should ask an advisor to ensure you make the right choice.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email and your question may be answered in a future column.

Please note that Brandon is not a participant in the SmartAdvisor Match platform, and he has been compensated for this article.

Photo credit: © Boonchu, ©