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Planning for Retirement as an Owner-Operator Truck Driver

Updated: Sep 26, 2023

If you maintain your current spending and savings habits, will you have enough money to retire comfortably? As your trucking business gets established, it’s important to start working a weekly or monthly retirement savings contribution into your budget. Retirement saving is critical when you’re self-employed and ineligible for any employer-funded retirement plan.

Planning for Retirement

A U.S. Department of Labor study found that Social Security will replace only about 40% of pre-retirement income for the average American. Yet experts say that after you retire, you’ll need about 70% of the income you earned before retirement to maintain your lifestyle.

At 70%, a trucker who earns $60,000 annually will need about $42,000 a year after he retires. When that figure is multiplied by 20 years — the average post-retirement longevity — that trucker will need about $840,000 to live comfortably. That entire amount doesn’t have to be saved in advance. Some of it would be supplemented by income from Social Security, retirement plans, or investments. Although it’s never too late to save for retirement, the sooner you begin, the better.

Owner-Operator Truck Drivers Preparing for Retirement

If a 25-year-old puts $400 into a retirement fund every month until he reaches age 65, and his money grows 10% a year, he will retire with almost $2.5 million. If a 35-year-old invests the same amount each month and earns 10%, he will have a little more than $900,000 at age 65.

Social Security

You have a choice whether to begin receiving Social Security benefits early (age 62), at full retirement age (between 66 and 67 years old depending on the year you were born), or later.

If you choose to collect Social Security benefits prior to full retirement age it may be important to understand when those benefits can be reduced. For 2023, taxpayers receiving benefits that have not yet reached full retirement age are entitled to earn up to $21,240 per year before any reduction in Social Security Benefits. If you earn more than this amount, your SSB will be reduced by $1 for every $2 you earn above the limit.

However, once you reach your Full Retirement Age (FRA), you can earn as much as you want without any reduction in your Social Security benefits. As an owner-operator truck driver, this means that you can continue to work and earn income while also collecting Social Security benefits.

Qualified Retirement Plans

When you make investments that are not part of a retirement program, you’ll pay taxes on earnings, such as interest from a savings account or profit from a stock sale. With qualified retirement accounts, you don’t pay a penny in taxes on the earnings until you retire and begin withdrawing money. Not only are taxes delayed for many years, but by then you should be in a lower tax bracket, so you’ll pay less in taxes.

In addition, most retirement plans allow you to deduct contributions from your reported income. That means if you make $40,000 and contribute $2,000 to a qualified plan, you report only $38,000 on your income tax return.

Below are the most popular qualified plans for owner-operators:

Traditional IRA

You are allowed to contribute $6,500 a year, tax-deferred, to an IRA with a catch-up contribution limit of $1,000 for individuals aged 50 and older. As long as you’re not covered by an employer-sponsored retirement plan, IRA contributions reduce your taxable income and are tax-deferred. If you or your spouse contributes to an employer-sponsored plan such as a 401(k), only a portion of your IRA contribution is deductible. Your IRA funds cannot be withdrawn before age 59.5 — except under special circumstances — without incurring a hefty penalty.

Roth IRA

The differences between a traditional IRA and a Roth IRA are the terms of contributions and payout. With a Roth IRA, contributions are not deducted from income, so they are taxable for the year they’re earned. But they do accumulate tax-deferred and are tax-free when withdrawn.

Simple IRA

The SIMPLE (Savings Incentive Match Plan for Employees) IRA was designed for companies with fewer than 100 employees. If you employ others, you and your employees qualify. Under a SIMPLE IRA arrangement, an employee of your business can contribute to and be matched by you up to $15,500 in 2023, with a $3,500 catch-up contribution limit for those 50 and older.


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 401(k)

For years, 401(k) retirement plans, another form of tax-deferred savings, were limited to employees, often with an employer match as a savings incentive. Since 2001, however, individuals have been free to set up solo 401(k)s, which have an annual contribution limit of up to $22,500, as long as you are classified as an employee of your own business (such as in an S Corp structure) and are paying yourself a salary. If you’re self-employed, the rules are more complicated. See IRS publication 560’s rate table and worksheets for determining your contribution limits.

ROTH 401(k)

A newer retirement plan option is a combination of the Roth IRA and the solo 401(k) called the Roth 401(k): Money you put into it is taxed in the year you earned it, but never again. Many financial advisers believe a Roth 401(k) is the best option for an owner-operator.

Assuming that taxes will go up in the long term is the safest of bets, so paying now locks in the lower rate. The more taxes you can pay while you’re younger, the better.

Retirement Countdown

If you want to enjoy a comfortable retirement lifestyle, you don’t need to have been born rich or even to have earned scads of money during your working years. But you do need to make the right moves at the right time – which means you might want to start a “retirement countdown” well before you draw your final settlement check.

What might such a countdown look like? Here are a few ideas:

Ten years before retirement

At this stage of your career, you might be at, or at least near, your peak earning capacity. At the same time, your kids may have grown and left the home, and you might even have paid off your mortgage. All these factors, taken together, may mean that you can afford to “max out” on your IRA or other retirement plans. And that’s exactly what you should do, if you can, because these retirement accounts offer tax benefits and the opportunity to spread your dollars around a variety of investments.

Five years before retirement

Review your Social Security statement to see how much you can expect to receive each month at various ages. You can typically start collecting benefits as early as 62, but your monthly checks will be significantly larger if you wait until your “full” retirement age, which will likely be 66 (and a few months) or 67. Your payments will be bigger still if you can afford to wait until 70, at which point your benefits reach their ceiling. In any case, you’ll need to weigh several factors – your health, your family history of longevity, and your other sources of retirement income – before deciding on when to start taking Social Security.

One to three years before retirement

To help increase your income stream during retirement, you may want to convert some – but likely not all – of your growth-oriented investments, such as stocks and stock-based vehicles, into income-producing ones, such as bonds. Keep in mind, though, that even during your retirement years, you’ll still likely need your portfolio to provide you with some growth potential to help keep you ahead of inflation.

One year before retirement

Evaluate your retirement income and expenses. It’s particularly important that you assess your healthcare costs. Depending on your age at retirement, you may be eligible for Medicare, but you will likely need to pay for some supplemental coverage as well, so you will need to budget for this.

Also, as you get closer to your actual retirement date, you will need to determine an appropriate withdrawal rate for your investments. How much should you take each year from your IRA, 401(k), and other retirement accounts? The answer depends on many factors: the size of these accounts, your retirement lifestyle, your projected longevity, whether you’ve started taking Social Security, whether your spouse is still working, and so on. A financial professional can help you determine an appropriate withdrawal rate.

Funding Your Retirement

As an independent contractor, the task of funding a retirement is entirely your responsibility so it’s important to make it a priority. Starting sooner rather than later is important because every day counts, and you will be more likely to achieve your goals.

How to get started funding a retirement:

Create a budget

A budget allows you to see how much you make, and where all of your money is going. If you don’t have enough money, oftentimes it’s one of two possible problems: you either don’t make enough money, or you are spending too much of the money that you make. For most of us, it is the second problem that we need to fix.

Reduce unnecessary spending

Figure out the difference between things you “need” and things you “want”, and cut back your spending accordingly. Take leftover money for what you don’t “need”, and put it into a retirement account and/or emergency fund. There are many different ways to cut out unnecessary spending. Nobody said retirement planning was going to be easy, but the sacrifices you make now will lead to a more comfortable future.

Establish an emergency fund

Once you have freed up some money by cutting back on spending, you can begin your emergency fund. This amount should be enough to cover all of your bills and expenses for six months, should a situation prevent you from working and earning income. Having this money set aside will prevent you from dipping into your retirement account if an emergency occurs.

Factors to Consider

When you create your financial and investment strategies for retirement, what will you need to know? In other words, what factors should you consider, and how will these factors affect your investment-related decisions, before and during your retirement?

Consider the following:

Age at retirement

Not surprisingly, your retirement date likely will be heavily influenced by your financial situation – so, if you have to keep working, that’s what you’ll do. But if you have a choice in the matter, your decision could have a big impact on your investment strategy. For example, if you want to retire early, you may need to save and invest more aggressively than you would if you plan to work well past typical retirement age.

Retirement lifestyle

Some people want to spend their retirement years traveling, while others simply want to stay close to home and family, pursuing quiet, inexpensive hobbies. Clearly, the lifestyle you choose will affect how much you need to accumulate before you retire and how much you will need to withdraw from your various investment accounts once you do.

Second career

Some people retire from one career only to begin another. If you think you’d like to have a “second act” in your working life, you might need some additional training, or you might just put your existing expertise to work as a consultant. If you do launch a new career, it could clearly affect your financial picture. For one thing, if you add a new source of earned income, you might be able to withdraw less from your retirement accounts each year. (Keep in mind, though, that once you reach 70 ½, you will have to take at least some withdrawals from your traditional IRA and your 401(k) or other employer-sponsored retirement plan.) On the other hand, if you keep earning income, you can continue putting money into a traditional IRA (until you’re 70 ½) or a Roth IRA (indefinitely) and possibly contribute to a retirement plan for the self-employed, such as a SEP-IRA or an “owner-only” 401(k).


During your working years, you may have consistently donated money to charitable organizations. And once you retire, you may want to do even more. For one thing, of course, you can volunteer more of your time. But you also might want to set up some more permanent methods of financial support. Consequently, you might want to work with your legal advisor and financial professional to incorporate elements of your investment portfolio into your estate plans to provide more support for charitable groups.

As you can see, your retirement goals can affect your investment strategy – and vice versa. So, think carefully about what you want to accomplish, plan ahead, and get the help you need. It takes time and effort to achieve a successful retirement, but it’s worth it.

Overcoming “Roadblocks” to a Comfortable Retirement

It’s important to consider the “roadblocks” you might encounter on your road to the retirement lifestyle you’ve envisioned.

Here are five of the most common obstacles:

Insufficient investments

Very few of us have ever reported investing “too much” for their retirement. But a great many people regret that they saved and invested too little. Don’t make that mistake. Contribute as much as you can afford and increase your contributions whenever your income goes up. Always look for other ways to cut expenses and direct this “found” money toward your retirement.

Underestimating your longevity

You can’t predict how long you’ll live, but you can make some reasonable guesses – and you might be surprised at your prospects. According to the Social Security Administration, men reaching age 65 today can expect to live, on average, until age 84.3, while women turning age 65 today can anticipate living, on average, until age 86.6. That’s a lot of years – and you’ll need to plan for them when you create long-term saving, investing, and spending strategies.

Not establishing a suitable withdrawal rate

Once you are retired, you will likely need to start withdrawing money from your 401(k), IRA, and other retirement accounts. It’s essential that you don’t withdraw too much each year – obviously, you don’t want to run the risk of outliving your resources. That’s why you need to establish an annual withdrawal rate that’s appropriate for your situation, incorporating variables such as your age, the value of your retirement accounts, your estimated lifestyle expenses, and so on. Calculating such a withdrawal rate can be challenging, so you may want to consult with a professional financial advisor.

Taking Social Security at the wrong time

You might not be able to afford to wait to take your Social Security, but by postponing the date you begin taking withdrawals, you could help yourself considerably.

Ignoring inflation

You want your portfolio to include some investments with the potential to outpace inflation, even during your retirement years.

By being aware of these roadblocks, and taking steps to overcome them, you can help smooth your journey toward retirement – and once you get there, you may enjoy it more.

Quick Tips

  • Start saving for retirement as young as possible, but start whenever you can – time is critical.

  • Start small if necessary – even small investments can reap large rewards over time.

  • Use automatic deductions from your payroll, whenever possible, in order to save regularly.

  • Don’t borrow from your retirement account(s).

  • 401K plans and Individual Retirement Accounts (IRAs) should make up the bulk of your retirement investments.

  • The younger you are, the more aggressive your investments should be.

  • Adjust your portfolio regularly, moving away from risk and into security as you grow older.

Retirement, like any good collection, builds in value and quantity over the years. It is impossible to create the amount of savings you need to retire if you wait to think about it for another 20 to 30 years. However, if you start now you can take advantage of the time, and use the full value of your hard-earned money. Little by little you’ll see your savings grow, and over time you’ll benefit from tax advantages, compounding interest, and you can start dreaming about what to do with all of it when you retire!

If you have dreams of someday enjoying a comfortable retirement, it’s time for you to start investing. If you’re still not sure where to put your money, we recommend speaking with an investment advisor as soon as you can.

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